Thursday, June 18, 2009

eToys - An example of an E-Commerce Failure and Its Causes (1997-2001)
I was reading the failures website. I notice that is one of the top 10 dot-com flops. is a retail website which sells toys via e-commerce. eToys was launched in October 1997, with funding from Sequoia Capital, Highland Capital Partners and Idealab. Like many other dot-com companies, the company that owned the eToys site filed for chapter 11 protection toward the end of the Internet bubble on March 7, 2001. At the same time, KayBee Toys (KB Toys) acquired the bulk of eToys’ remaining assets for $5million. The website was eventually reopened by eToys Direct Inc., a descendant of Internet startup and KB Toys partner, and a subsidiary of Parent Company. It continues to market toys by mail order under eToys name through both the website and printed catalogs. On 22 December 2008 eToys Direct filed for Chapter 11 bankruptcy and it was acquired by Toys “R” Us in February 2009.

There are some reasons why eToys has failed:
1. Disrespecting competitors
One eToys senior manager reportedly boasted at the height of the Internet boom. What eToys forgot on the way to bankruptcy is that Toys “R” Us had even more powerful advantages, such as established customers, experienced in the toy business, and the heft to ensure supplies of hard-to-get hot toys. As eToys learned, disrespect is the first step to disaster.

2. B2C E-Business failures
eToys failed to appreciate the fact that theirs was a new service to the customers. The management must carefully handle both the front and the back-end of their businesses efficiently and effectively. During the 1999 holiday season, eToys was accused of falling short of one of its initial goals-speedy and reliable customer service. Thousands of customers complained that their orders were either late in arriving at their destination or contained the wrong merchandise.

3. Expensive advertising campaigns
Marketing tactics are what helped make eToys strong. It became a household name for unique, yet very pricey, print advertisements and commercials, which appealed to both parents and children. This resulted in eToys not being able to adequately meet the needs of its customers.