The most interesting thing to me about the news last week that eToys.com was launching a national print and television campaign to build brand awareness was not the fact that it was spending $20 million.
Nope. What made me take notice was that the $20 million represents nearly 70 percent of the online toy-seller's 1998 revenue. Even with eToys.com's 1999 revenue expected to reach $125 million, the ad spending still makes up more than 16 percent of overall sales. As those who are not in the toy business would say, that's a lot of Barbies.
For anyone who's been looking at the trials of online retailing, though, that number isn't news. Shop.org, a trade association of more than 200 online retailers, says Internet-only retailers - the so-called "pure-plays" - spent 76 percent of their overall revenue in 1998 on marketing and advertising. I guess that puts eToys.com below the average. But its spending still is hefty compared with the 13 percent of revenue that multichannel retailers - now known as click-and-mortar retailers because of their online and offline stores - spent on such activities last year, according to Shop.org.
Again, that number isn't surprising if you consider that most pure-plays are newcomers to their markets and don't have the luxury of piggybacking on a brand built by a brick-and-mortar chain or catalog business.
But there's been a lot of talk about whether ToysRUs.com has lost unrecoverable market share by being so late to the online party. With a lackluster Web site and seeming inability to get its management act together, ToysRUs.com would seem to have forever ceded some online market share to rival eToys.com.
I asked John Barbour, who's been chief executive of ToysRUs.com for the past four weeks, what he thought. The way Barbour sees it, the numbers are still on his side. Of the 28.8 million consumers who will shop on the Web this year, 10 million will be using their credit cards online for the first time. And for a good number of those first timers - not to mention some of the 18.8 million others - brand names are going to be an important factor driving users to Web sites, he says.
And though "the world's biggest toy store" may have had a few troubles getting its e-commerce strategy together - including losing a prominent venture backer and its first CEO - Barbour still thinks the ToysRUs brand has enough cachet to draw those new online shoppers.
"I think most consumers don't know anything about what's been going on behind the scenes at our site. To them, we're a brand name they know, a place where they can find the products they want," he says, citing a Harris poll that found that 64 percent of online shoppers say they're going to buy their toys this holiday season from ToysRUs.com. "And unlike eToys[.com], you can return products to any one of our stores. That's going to be a huge competitive advantage for us."
I'm not willing to concede the market to ToysRUs.com. It has to prove it can deliver on the e-commerce promise. But I agree that brand is an important driver - especially with so many new consumers shopping online for the first time.
EToys.com is betting $20 million it can beat ToysRUs.com in the brand game. And me? I'm not ready to bet my Barbies on anyone just yet.