Can Toysrus.com Overtake eToys?

Toys “R” Us has a problem. Its Web site, which has been a lightning rod for controversy ever since the company’s Internet division was formed, has been overwhelmed with traffic.

In fact, to keep the site from crashing, it has been reported that the Paramus, New Jersey-based toy giant is actually putting a limit on how many people can visit the site at any given time.

The consensus among many industry observers is that this latest fiasco could be the final chapter in a comedy of errors that will destroy any remaining confidence that consumers have in the toy sellers online store.

Sad Saga

The downward spiral began in August, when the company announced that it had severed its much-touted partnership with Benchmark Capital. Toys R Us declined to go into detail as to why the deal crashed and burned.

Some industry observers speculated at the time that the Silicon Valley venture capital firm was concerned that toysrus.com would have insisted upon applying its brick-and-mortar mindset to its e-commerce marketing foray.

This turn of events came only a month after Robert Moog, who was recruited in May to become Toys’ Internet guru, decided to pack it in. Some say that the former founder of University Games, Inc. abandoned Toys’ cyber-project after the company brass rebuffed his suggestion to heavily discount toys that were being offered online.

Moog said the action was necessary in order to compete with eToys, Inc. and Amazon, but management apparently feared that such a discount plan would undercut its network of 700 franchises throughout the country.

Restructuring Under New CEO

Soon after this crisis, industry veteran John Barbour took the company reins and sparked a surge of optimism among some analysts.

Barbour and his new team redesigned the site, expanded its product offerings, and added staff to its customer service center. Toys “R” Us then aligned itself with online giants America Online and Yahoo! and began advertising its site on the radio.

The company has made many of the right moves needed to bring its online store up to the same level of service its brick-and-mortar customers have come to expect. Nonetheless, toysrus.com still has at least one remaining hurdle, that being upgrading the site’s system to handle the resulting 10-fold increase in traffic from its recent marketing efforts and alliances.

Champagne Popping At eToys

When eToys launched its Web site in October 1997, it had no other competition. Toys ‘R” Us opened its online store in mid-1998 and to-date has gained little ground on the online-only toy seller.

Ultimately, the 1999 holiday sales season should end up being the litmus test for toysrus.com.

What do you think? Let’s talk about it.