Kids aren't the only ones fighting over toys. Two of the oldest and maybe most successful virtual playmates showed some signs of sandbox stress yesterday when Toys "R" Us (NYSE: TOY) said that it is suing its long-time online partner, Amazon.com (Nasdaq: AMZN).
The toy biz has been tough for a while; recall infamous flameouts like eToys. In fact, when Amazon and Toys "R" Us joined together, it was the first indication that Amazon might have a future as a kind of virtual shopping mall, where it could play host to other retailing partners, which now include Target (NYSE: TGT) and Office Depot (NYSE: ODP).
If you flash to the present, you likely already know that the toy biz is cutthroat, with discounters like Wal-Mart (NYSE: WMT) winning. High-class FAO Schwarz went from troubled to bankrupt within weeks last holiday season. Shortly thereafter, KB Toys suffered a similar fate.
Toys "R" Us is suing Amazon over exclusivity, and the fee (the Street.com reported a $200 million price tag) it has paid for that right until 2010. In other words, the two companies agreed that Toys "R" Us would be the only toy purveyor on the site.
However, from playing around a little bit with Amazon's site, I found all my searches for toys directed me right back to Toys "R" Us. However, according to Toys "R" Us, there are about 4,000 items that have fallen through the cracks, being offered by other retailers through Amazon.
It's not too surprising that Toys "R" Us would react, considering how it's suffered, though it's been showing signs of recovery. It was tough to shutter its Kids "R" Us outlets and have its debt downgraded to junk status. For now, Toys "R" Us remains the No. 1 online toy store, and it sounds desperate to keep those Amazon-generated sales high.
Amazon gave the standard line -- that the suit is without merit. It added, "We believe we can have multiple sellers in the toy category to increase selection and to offer products that [Toys "R" Us] doesn't have," according to a Reuters article.
Toys "R" Us gets a lot of exposure on the Amazon site, commanding the Toys & Games tab. From the way the site is set up, it seems as though much of the time Toys "R" Us is getting first crack at Amazon's toy shoppers, even if some other retailers are hawking some items if one digs deep enough, or for something obscure enough.
One can only hope that this gets settled amicably; it seems Toys "R" Us stands the most to lose, given Amazon's role in putting it in its No. 1 spot in the virtual toy box. And if indeed Toys "R" Us isn't supplying some of the toys in question, then both companies have to think of the customer being first, or both stand to lose.
What do you think? Does Toys "R" Us stand a chance? Key up the Amazon.com discussion board and make your opinion known.
Alyce Lomax does not own shares of any of the companies mentioned. When shopping for baby shower gifts for friends, she prefers the solitude of Amazon's BabiesRUs.com site.
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