Chances are, parents who bought children's gifts from Toys "R" Us' brick-and-mortar stores this past holiday season had a merrier Christmas than those who bought gifts from the company online.
Near the end of December, the company told customers that the volume of orders on the www.toysrus.com site prevented it from fulfilling orders placed by Dec. 10, the cutoff date for standard delivery by the holiday.
To hear Toys "R" Us officials tell it, the company's Web site was the victim of its own success. The toy and game retailer's brand is so strong that people flocked to the site in enormous numbers. The problems that ensued were an unfortunate but inevitable result, officials said.
"People prefer to buy from companies that they know," said Leanne Lavin, a spokeswoman for the Paramus, N.J., company. "We have an advantage in that we don't have to build up the brand."
That means, Lavin said, people swamped the site fast. But the deluge didn't play into the company's online strategy. "Our objective going into the season was to provide the hot toys and to build the business long term," she said, adding that the e-commerce business "is a marathon, not a sprint." To many customers, however, Toys "R" Us has already lost the race.
A class action lawsuit, filed Jan. 12 in King County Superior Court in Seattle, alleges fraud on the part of the retailer. The plaintiffs claim the company knew it could not deliver on its promises. The lawsuit was filed on behalf of disappointed U.S. customers who had placed orders by Dec. 14, the original cutoff date for items to be delivered via premium shipping in time for the holiday.
One plaintiff, Kimberly Alguard, of Lynn wood, Wash., asserts that the retailer "wrecked [her] Christmas" by promising that gifts for her 4-year-old ordered Dec. 7 would be in her hands by Dec. 22—and then not telling her until that day that the items would not arrive before Christmas.
It may have been the retailer's holiday spirit that got it into trouble. A promotion in early November for free shipping and free Tickle Me Elmo dolls spurred activity on the Web site. On Nov. 15, the company announced it was tripling its Web servers to meet demand. Despite its good intentions, the site was plagued with slowdowns and periodic outages for several days. And the difficulties continued through Dec. 22.
Toys "R" Us tried to mollify customers by handing out $100 gift certificates to those whose orders would go unfulfilled. But the Grinch had already stolen Christmas if you ask Alguard and the others participating in the lawsuit.
There's no doubt the retailer's site was inundated with holiday traffic; an analysis from Media Metrix Inc., of New York, shows a 356 percent increase over the same period in 1998. Still, the site's holiday woes offer a cautionary tale to other online vendors, according to analysts. "Toys 'R' Us is definitely the big failure story of the 1999 holiday season," said Carrie Johnson, an analyst at Forrester Research Inc., in Cambridge, Mass. "They drove so many people to the site with those free delivery offers, and they were totally unprepared to handle it. It doesn't matter how much traffic you get if [customers] end up going elsewhere to actually buy the product."