Web commerce will be used by Toys R Us to boost sales

The Associated Press

TRENTON, N.J. -- Toys R Us Inc. has announced plans for a major push into e-commerce, saying it will spin off its Web sales operation into a separate subsidiary called toysrus.com.

The Paramus-based company vowed to leapfrog past eToys into the top spot among online vendors of toys, clothing and other children's products by the fall, the all-important holiday shopping season, chief executive officer Robert C. Nakasone said Tuesday. "We can see this, over time, becoming an important business for us," Nakasone said. "We're going to be No. 1 in e-commerce in toys and children's products for the fourth quarter." The company also will build a large distribution center in Memphis, Tenn., and possibly sell stock for the unit. Toys R Us said it will take on Benchmark Capital, a Menlo Park, Calif. venture capital firm, as a partner. Toy industry analyst Sean McGowan, of Gerard Klauer Mattison, said that goal is feasible, given the company's name recognition and popularity. "I think they're late (focusing on e-commerce), but it's good that they're doing it now, and they have a strong chance of being successful," McGowan said. Toys R Us was passed by Wal-Mart Stores Inc. as America's top toy retailer last year. It still claims to be the world's biggest retailer of children's products, with $11.2 billion in annual sales, but the company reported a $132 million loss last year because of a $508 million charge for store closings and restructuring. Toys R Us has operated a Web site for nearly two years, but until last June it only supplied company information such as store locations. After beginning to sell toys on the Web, Toys R Us saw a jump in online visitors -- including a surge so strong during the holiday season that the Web page had to be taken down for a few days -- leading to the decision to improve the site, Nakasone said. While Internet toy sales are only expected to total $52.6 million this year, or 0.2 percent of all U.S. toy sales, those revenues are expected to increase tenfold to about $555 million in the next three years, according to Ken Cassar of New York-based research firm Jupiter Communications Corp. Earlier this month, Mattel, the world's biggest toymaker and one of Toys R Us' biggest suppliers, announced it would spend $50 million to launch an Internet sales venture called Mattel.com in October. Toys R Us operates 1,488 stores worldwide, down from its peak of around 1,500, according to company spokeswoman Rebecca Caruso. The company operates a store in Topeka at 2190 S.W. Wanamaker Road.

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