BUSINESSWEEK ONLINE : OCTOBER 23, 2000 ISSUE
BUSINESS WEEK E.BIZ -- COVER STORY ONLINE EXTRA: Q&A with Toys 'R' Us CEO John Eyler How the company's deal with Amazon.com will help it remain a "best-of-class brand" on the Net In August, Toysrus.com, the Net unit of the toy-retailing giant, announced a pioneering alliance with former rival Amazon.com. The two companies decided to team up and make the most of their respective strengths, instead of continuing to struggle separately with selling toys online. Amazon will handle all orders, including shipping and customer service, for Toysrus.com, which sends the customers to a joint store on Amazon's Web site. Toys 'R' Us CEO John Eyler spoke with Business Week's Nanette Byrnes about the alliance: Q: Why do the deal with Amazon -- why not just continue on your own? A: When you look at toys specifically, it has a series of real problems being successful online. It's a low price point, it's a low margin, and it's a nonreplenishable business. You have to order six months in advance. It's not like books, where if something is selling well, you just order some more. The availability of best-selling product to meet the demand has to be forecast well in advance. When you put all those things together, it does not appear on any kind of analytic blush an easy business to make money in. There are a lot of customers and potential customers who want to be able to shop the Internet, and if we're going to continue to be a best-of-class brand, we need to be able to serve the guest in any way they want to shop. Q: So, do you already have a system worked out to get your merchandise from your store warehouses to the Amazon warehouses as needed? A: Yes. Q: Will you be putting more money into Toysrus.com? A: Only as required. Q: After Christmas, if all goes well, will you be considering an IPO of Toysrus.com? A: At this point, we're not in the process of looking into that, so I really couldn't comment. Q: How important is the Web going to be in the grand scheme of things at Toys 'R' Us? A: It will be an important channel. In some other businesses, it may be the primary channel. Software, music -- where you can use the same channel as the product delivery -- is pretty compelling. For us, is it a positive? Absolutely. But [for] toys or any other business that requires product delivery, the consumers will have to pay a reasonable portion of the cost of doing business. As this business shakes out, what you will see increasingly is that legitimate costs will have to be passed along. Over time you can't have a business that loses money and loses money and loses money. So as pricing rationalizes, you'll see some decrease in demand. It still has to be shipped. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS EBIZ Contents for issue dated Oct. 23, 2000 Cliff-Hanger Christmas TABLE: Building the Perfect E-Tailer TABLE: Breakeven or Bust TABLE: E-Tailers vs. Retailers Double Play TABLE: Toys `R' Both of Us Service, Please TABLE: Profile of the Online Shopper ONLINE EXTRA: Q&A with Toysrus.com CEO John Barbour ONLINE EXTRA: Q&A with Amazon CEO Jeffrey Bezos ONLINE EXTRA: Q&A with Toys 'R' Us CEO John Eyler INTERACT E-Mail to Business Week Online

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