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eToys Eases Holiday Shopping

As an uncle, Toby Lenk lived the nightmare that went into shopping for Christmas toys: the crowds, the lines, and of course, the screaming kids.

He knew there had to be a better way.

Lenk's solution, eToys, is one of the hottest Internet retailers. Some say the year-old eToys does for toys what did for books, which is offer a convenient way to buy a wide array of merchandise at reasonable prices.

Making the Most
Of the Holi-daze
"People hate shopping at toy stores, and I know that because they kept saying `If you liberate me from toy stores, I will be your friend for life'," Lenk said. "I knew eToys could change the experience."

Lenk, who is 37, left his job as an executive in Disney's theme parks division in 1996 with the ambition to open some kind of store on the Internet.

His research pointed to toys, a $23 billion a year industry that had very minimal exposure on the Internet. The No. 1 toy-seller, Toys R Us, didn't have a Web site and other online startups carried only limited merchandise.

Then came Christmas, and Lenk found himself dragging through toy stores in search of gifts for his two nieces and a nephew.

"I had to go through my typical death march to the toy store to find the perfect gifts so I could be the hero at Christmas time," he said. "After that, I knew that eToys was a concept that could really work."

Santa Monica, Calif.-based eToys was launched in October 1997, just in time for the important holiday shopping season, when toy retailers generally do at least 50 percent of their business. Consumer interest was much greater than expected.

"It was important for us to get out there last Christmas and just get people to know we existed," Lenk said. "But our Web site at the launch was only OK. We knew it wasn't where it should be."

In the last year, Lenk and his staff, which has grown to more than 100 employees, have created a much better eToys. Last March, eToys bought for an undisclosed price, acquiring its biggest competitor on the Internet.

Its new Web site allows shoppers to scan a list of the hot toys, search by toy name or manufacturer, and find toys appropriate for a child's age.

eToys sells products from more than 500 manufacturers, including big mass market brands, like Mattel and Hasbro, and small, specialty names, like Brio, Eden, and Creativity for Kids. That's a wider range than most land-based stores or other online toy retailers offer today.

eToys also stocks a full inventory of products offered on its site, something most online erchants, toys or not, don't practice. That allows shoppers to know if an item is immediately available and also speeds up delivery time.

"I wasn't prepared for how much better eToys was from the rest," said Sean McGowan, a toy analyst at Gerard Klauer Mattison. "There are very few things that other toy stores had that eToys didn't have. It's fast and accurate. It's light years ahead of everyone else."

Even with eToys current success, Lenk knows the business must grow and outpace the competition, almost all of which are now online. Mattel now sells Barbie online, while Toys R Us, Wal-Mart, Sears and FAO Schwarz are building their online presence.

Lenk continues to seek investors to pump more money into the business. The company is considering an initial public stock offering in the future, but much of that depends on stock market conditions and the company's future performance.

In recent months, eToys agreed to match discounted prices found at other online sites or at land-based retailers. In addition, it's added books, videos, software and video games to the site, becoming a kids' superstore of sorts. Lenk, however, has some limits to his goals for the site.

"One-stop shopping is very important if you can find a very focused position," said Lenk, using some of the business sense he learned while getting his MBA from Harvard. "I think throwing yourself into a thousand retail categories online is a recipe for disaster."

Instead of doing it themselves, eToys recently signed a preliminary agreement with leading online merchants CDNow, Cyberian Outpost, and to create an Internet shopping mall.

Realizing the growing competition, Lenk's focus is on marketing the eToys name. There will be television and print advertising campaigns airing during the holiday season, all directed at adults.

One television ad takes him back to Christmas' past: It shows parents using guerrilla-like tactics to capture the hot toys for the holidays.

"I'm glad I never have to face that again," Lenk laughs. "It's not fun."

By Rachel Beck