The company, based in LA and founded in 1996, is one of the world’s largest internet retailers. It has admitted that it will probably not now meet its target to break even in 2003 and has hired Goldman Sachs to explore strategic alternatives, including a possible sale or merger of the company. The company is said to have cash to last only until 31st March.
According to traffic statistics, eToys was the number two shopping site over the Christmas period, behind only Amazon.com. However, Amazon.com’s lead was significant, enjoying around five times the number of visits received by eToys. The main rival of eToys is Toysrus.com, the on-line division of the “traditional” toy shop, Toys ‘R’ Us. Toysrus.com ate into eToys’ market share this year by virtue of its strategic partnership with Amazon.com.
However, sales by Toysrus.com, which now trades only as part of Amazon.com’s site, were also said to be below analyst hopes, at around $150 million for the fourth quarter, on expectations of around $250 million. One of the reasons given for the failure of on-line toy sales to materialise is that many parents still prefer to visit shops and examine the toys themselves. Another reason appears to be the absence of a “must have” toy this year, with the exception of the PlayStation 2 which was in short supply.
The share price of eToys dropped again yesterday to just 16 cents from a peak of $86 in October 1999. Its fourth quarter sales are expected to fall between $120 to $130 million, around half the company’s forecast.