A big battle is shaping up over the $23bn (£14bn) online toy market this holiday season, as the major offline retailers make plans to fight back against the Internet upstarts who walked away with the sales last year.
So, when Buena Vista Internet Group, a division of Walt Disney, announces that it is buying what analysts estimate is a $45m stake in Toysmart.com, an online toy seller, it would seem like Mickey Mouse is ready to duke it out in the world of Barbies and Pokemon. (See Disney buys controlling stake in Toysmart.com.)
But officials for Buena Vista and Toysmart.com said Wednesday that they are explicitly not going after the mass-market of trendy toys. Instead, the companies said that they will focus on what they think is a growing category -- "good" toys that help children learn without being trendy or violent. "These are all of the toys you don't find at places like eToys and Toys 'R' Us," claimed Kelly McGovern, chief marketing officer at Toysmart.com. "These are hard to find, high-quality toys that are of high play value, educational and or developmental and open ended. Good toys are not violent, not fad driven and not over the top fashion oriented."
eToys Vice President of Communications Ken Ross couldn't be drawn to directly respond to McGovern's comments. Instead, he said that eToys was concentrating on remaining the market leader in the online toys space. "We occupy a unique position in the market," Ross said. "We are the only retailer 100 percent focused on children's products and 100 percent focused on the Internet -- that enables us to understand this space [online toys] better than anyone.
"We eat and breathe this stuff. And there is no one else that does that: just kids, just the Internet," Ross said.
The "good" toys market is bigger than you might think. Toysmart estimates that 38 percent of the $23bn toy market are "good" toys, but because many of the toys are currently sold through independent local stores, they haven't made as much of an impact online.
"The online catalogues -- eToys, Wal-Mart, Toys 'R' Us -- they don't solve the problem that parents have, which is what to buy," said David Blohm, president and CEO of Smarterkids.com. Blohm's site, which helps parents choose toys based on children's age, interests and learning patterns, was actually the top toy site in July, according to market research firm PC Data. "People hate going to Toys 'R' Us, and I think in the end the winners in e-commerce are those who add value to the purchase process," he said.
Toysmart is hoping that combining its products with content from Disney's Family.com site will add that value. Neither side would put a monetary value on the deal, but analysts estimated its value at $45m. That figure includes online and offline promotions.
The Family.com relationship will be the initial link between the two companies, with Family.com promoting and linking to Toysmart. Future promotions could include things like ads in trailers for Disney movies and commercials on ABC. "It's estimated that about 20 million Disney customers will see the Toysmart name, and this is a company that was relatively small," said Carrie Ardito, an analyst at Forrester Research. "This catapults them to leader (status) in the educational market."
The thing Toysmart needs to be careful of, however, is letting Disney get too close, she said. "They have to maintain integrity. They have trust with parents as a reliable tool for toys that enhance child development," Ardito said. "They have to be careful not to get sucked under the Disney brand name." McGovern said that Disney items will make up only about 500 of the roughly 75,000 products Toysmart hopes to feature online.
She added that about 90 percent of those Disney products meet Toysmart's qualifications for "good" toys. But, she said, they've already ruled out featuring certain products -- such as a Hercules toy sword -- on their store.
"What they saw and are looking to preserve is our entrepreneurial spirit," she said.
Joel Deane contributed to this report.