Etoys Essay, Research Paper

II. Company Mission; Background/History

The vision of eToys is to create the premier family-oriented destination on the Internet. eToys was launched in October of 1997. eToys was created to offer an extensive selection of products from well known and specialty toy brands, a combination that would be both economical and physically impractical to stock in a traditional store like KBToys or Toys R Us. It came became known as the leading Internet retailer of children?s products, carrying more than 100,000 competitively priced items. Another key feature of eToys is the fact that people can shop 24 hours a day, 7 days a week and have instantaneous access to product information, helpful shopping services, and innovative merchandising strategies. Not only does eToys provide toys, but they also provide a number of services to the consumer. They supply gift recommendations by age, relationship, and price specification, child-appropriate gift wrapping, personalized message cards to accompany the gifts, and electronic gift certificates. eToys also provides a birthday reminders service, through which they notify shoppers of a child?s birthday three weeks in advance via e-mail. Through the Wish List service, parents and children can e-mail family members and friends a list of the gifts they would like purchased for them. eToys launched http://BabyCenter.com as a resource for shoppers of infants and toddlers. Another website wholly owned by eToys is http://www.ParentCenter.com which serves as a resource for parents as their children grow beyond BabyCenter?s prime age range. This new parent center site also provides the company an additional high margin revenue opportunity. eToys advertises on major sites such as AOL, Sesame Workshop, Excite, Infoseek, Microsoft Network, Yahoo!, and Lycos. In October 1999, they initiated an international expansion by launching http://eToys.co.uk. Then, in March 2000, eToys launched their BabyCenter?s sister site, http://www.babycentre.co.uk. These sites were designed to meet the unique needs of customers in the UK and will spread across Europe. As of July 31, 2000, EToys had approximately 1000 full-time employees. Looking into the financial future, EToys expects its quarterly loss to narrow from year to year. The company launched a fully integrated holiday marketing program that includes two new television commercials that began airing in late September, a consumer catalog premiering in November, and new or renewed partnerships with Rosie O?Donnell Show, McDonald?s and Cheerios. eToys continues to grow and give Bracken Mortar stores like Toys R US and KB Toys a run for their money through new expansions to their sites and new marketing strategies.

III. Competitive Forces Model

Customers

eToys uses advertising and promotion to target purchasers of children?s products. Their main focus is on mothers. Mothers are considered to be the main decision makers in the purchase of children?s products. They are also strong influences in purchase by friends and family.

Suppliers

eToys carriers over 100,000 children?s products. They also carry more than 750 brands. Some brands that are carried are Barbie, LEGO, and Disney. They also have special brands such as BRIO that are not sold at toy superstores. Along with toys, eToys also carries books, videos, games, software, music, and party goods for those 750 manufactures.

Top Competitors

eToys has three companies that are considered its top competitors. Amzon.com, which was started in July of 1995, is one of the three competitors. They offer products such as free electronic greeting cars, online auctions, millions of books, CDs, videos, DVDs, toys, and games. Amazon.com serves over 20 million people in more than 160 countries.

Another competitor is Wal-Mart, who was founded by Sam Walton. It is considered the number one retailer with about 4,000 stores and online shopping. Wal-Mart is an unavoidable retail force, which knocked Toys R Us off its number one spot for toy retail. Wal-Mart has the ability to offer toys at a discounted price, making it harder for competitors to compete.

The last competitor would be Toys R Us. Toys R Us offers toys, games, sporting goods, and software. It has more than 1,500 stores, websites, and catalogs in which is sells children?s clothes and babies clothes. Toys R US is now restructuring by closing some stores and redesigning other because of its lost in market share to companies such as eToys, Inc. and Wal-Mart Stores, Inc.

New Market Entrants

There are several businesses that are trying to become the number one toy store of the internet. Smarterkids.com is one of them. Smarterkids.com is said to be leading online store for parents with children. The company has thousands of quality educational toys, games, books, software, hand-on-activities, and services from many leading manufactures. Smarterkids.com feels feeding the brain will give its online toy sales some muscle over its competitors eToys, Inc. and Amazon.com, Inc.

Another online store that feels overtime it will be a number one online toy company is Toys2Wish4.com. Toys2Wish4.com was founded in Connecticut. It is a new online toy store that opened December 15, 1999. The founder and CEO, Howard Lawrence, believes that his company brings a unique selection of the world?s greatest toys to the internet. Lawrence is trying to establish a niche on the internet. Over time Lawrence feels that this company will be able to compete with online stores like eToys.

Substitute products and services

There is one main substitute services that can be done. This would be to shop at brick and mortar stores. This means that instead of shopping online customers can go to actual stores and buy what they want. This is said to be more efficient because customers know exactly what they are buying. It makes them feel comfortable about the item that they have purchased since they are able to see it and also touch it. They also don?t have to worry about delays in delivery or receiving items that are broken. This way they are sure that these products are on time and also what they wanted.

IV. E-business/E-commerce

Etoys is a pure based Internet retailer. Specializing in children?s products, eToys is a premier internet retailer with an extensive selection, including nationally advertised and specialty toys, software, books, videos, music, video games, hobby products, party goods and baby oriented products. Appealing to the demands of consumers is the focus of eToys website design. Customers must be able to reach a desired destination on the website within a couple clicks of the mouse.

The use of the internet for online retailers can prove to be effective/profitable with proper website design. To be effective, internet retailer?s must create a website centered on the customer. There are three general factors to consider in the design of a consumer oriented retail website. They consist of control, convenience, and confidence. The implementation of each contributing factor results in a customer friendly website.

Etoys establishes the control factor through easy navigation of their website. Consumers are annoyed by sites that are difficult to navigate, slow, and disappointing in the logic used to find wanted information. Etoys has created an easily navigatable website offering simple to locate merchandise. Consumers looking to shop at eToys must have a web browser that supports ?cookies.? In order to keep track of items added to a customer?s shopping cart, “cookies” is necessary. Customers have several choices in deciding how to best browse eToys website. Appealing to customer individuality, a consumer may choose to shop by age, category, subject, price, title, and a host of other search options. Control increases further by the ability of consumers to access all of their order information from customer service at any time. Etoys provides a customer service e-mail address and a toll free telephone number, 1 800 GO ETOYS, operating twenty-four hours a day and seven days a week.

Convenience is another factor to consider in the design of a site. The features and applications of a website can ease the internet shopping experience. The Big Gift, Holiday Hot List, and the Wish List are examples of added consumer conveniences. The Big Gift helps customers easily find the extra special gift for the children in their life. This unique place features more than 250 gifts with a price tag of $100 or more. The Holiday Hot List is a list of the most demanded items of the season. The wish list, another added convenience, allows customers to create a wish list and e-mail it to friends and family. When purchases from the list result, all purchases are checked accordingly to prevent duplicate gifts from being purchased. Convenience is an essential application in the designing of a website.

A customer must have confidence in the internet retailer to make purchases. Consumer confidence may be gained in many ways. Etoys places a promise to the consumer at the top of every page stating: ?We have the lowest prices, easy returns, and 100% safe shopping.? A click on either policy link located in the statement provides elaborate details on each policy. This placement allows consumers to access policies at any point while visiting eToys website. Visual merchandising is another way to create consumer confidence. The Big Gift is the showcase for interactive product demonstrations, allowing customers to view products from all angles and zoom in for better looks. The help center offers customer assistance on every aspect of eToys website. A parent helper is also provided to assist parents in deciding whether video games (for example) are suitable for your child. Etoys employs consumer confidence throughout the entirety of their site.

In some applications, eToys request information from the customer. The use of these datamining techniques is essential in their attempt to gain strategic advantage. Etoys uses this information to encourage repeat business from their customers. Etoys sends a monthly newsletter to keep customers updated on special sales, promotions, new features, and advance notice on hot toys. The ability to maintain contact and inform past customers of upcoming events is a key asset to eToys.

E-toys could improve its website by providing added incentives to customers that may coerce them to visit their website more frequently. A feature such as ?item of the week? may encourage potential customers of visit the site. The more visits to eToys website creates the opportunity of increasing sales. A game site could also be added to promote children entering the website. Because eToys specializes in children?s products, an increase in the number of child hits to the site could be beneficial to eToys. A game site would attract more children to browse the site, creating greater interest in products available at eToys.

Overall, eToys use of technology creates added pressure on its competitors. The website is informative, easily navigatable, well organized and fairly priced. Etoys site is considerably more intuitive and faster than its traditional competitors, Toys R Us and Amazon.com. Etoys has created a website that excels in the areas of design, ease of use, selection, availability, speed, interactivity and pricing.

V. Ethics, Globalization and TQM

Ethics

Secure and safe shopping at eToys is guaranteed 100% safe. There servers use Secure Sockets Layer (SSL), an advanced encryption technology that works with Netscape Navigator (versions 2.0 and above), Microsoft Internet Explorer (version 3.0 and above), and AOL (AOL 3.0 and above). This technology safeguards the consumer?s personal information and guarantees privacy.

EToys claims to respect the consumer?s privacy by not selling, renting, loaning, or transferring any personal information regarding their customers or their kids to any unrelated third parties. Information collected on eToys websites are collected and used by eToys, Inc. and its subsidiaries and affiliates (?eToys?) and, in limited cases, eToys service providers who are subject to confidentiality agreements. Any information collected by eToys is used for data mining three main purposes. First, they collect information to figure out how to improve their site by seeing which areas, features and products are most popular. Second, they collect information in order to personalize the site for their customers and their kids. For example, in the future, eToys may recommend products or features the consumer likes based on what they have liked in the past. Last, they collect information to enable customers and their kids to conduct transactions on the Web site and participate in sweepstakes, contests and other activities. On occasion, eToys may share non-personal summary information regarding their customers with unrelated third parties (for example, they publicly disclose the aggregate number of registered users of the eToys website). However, eToys does not share any personal information about any particular customer with unrelated third parties. eToys is a Certified Merchant of America Online and has agreed to abide by AOL?s privacy policy, http://shopping.aol.com/custserv/guarantee.adp.

TQM

eToys stands behind the quality of all of their products. A consumer may return any item in its original condition, for any reason, at any time. eToys will gladly issue a gift certificate covering the value of the return that may be used to purchase any item(s) they carry. Or, if the consumer prefers, they will replace any item, or issue a fully refund ? it?s the consumer?s choice. If eToys made the mistake, they will also refund the shipping and any Gift Wrapping charges. Software, videos, video games and equipment, and audio products must be returned unopened. Information about their return policy is included with each shipped order on the back of the packaging slip. It takes approximately two weeks to process a return once it arrives at the warehouse. A consumer can email eToys to check on the status of a return.

Diversity

eToys has over 100,000 children?s products, including toys, books, video games, software, videos, music, and party goods from more than 750 manufactures. eToys carries more than 750 brands, including well-known brands such as Barbie, LEGO, and Disney, as well as specialty brands such as BRIO, which are not available at toy superstores like Toys R US. Aside from just toys, eToys offers personalized message cards, electronic gift certificates, and a birthday reminder service to its consumers.

Globalization

In October 1999, eToys initiated their international expansion by launching etoys.co.uk. Then, in March 2000, they launched yet another international site called babycentre.co.uk. These sites, as stated earlier, were designed specifically to meet the needs of the customers in the UK and serve as the springboard for further expansion across Europe. eToys is headquartered in Santa Monica, California, and has regional offices in San Francisco, California; Danville, Virginia, and London England.

VI. Financial Charts

In keeping up with its? strongest competitor, http://www.ToysRUs.com, Etoys has expanded its business to acquire http://www.Toys.com and http://www.eparties.com to keep up with the financial presents of Toys ?R? Us, Inc. With similar fluctuations in their stock prices, the ever expanding ideals of eToys into other areas such as parties, videos, and overseas markets, eToys is holding its spot as the number one online retailer in children?s toys. A decision, announced in April of this year, decided to spin off the European segments of the company in order to reach that goal of finally turning a profit for the company.

During our fifteen day assessment of eToys there has been a decrease in the stock prices of our company for twelve of the fifteen days. Even with the downward spiral in the stock prices, reaching a fifty two week low in the assessment, analyists predict that with the up coming holiday season it will all turn out for the better. Since the opening of the web site in October 1997, there has been a rapid growth in the net sales of the company. Yet like all of its competitors it has yet to see a profit. Some predict that within five years that eToys will see it first net profit in the companies? short history.

VII. In the News

During the past year, eToys? shares have fallen on the Nasdaq to less than $2 from $70.52. EToys? long-term rating was downgraded to ?neutral? from ?accumulate? by Merrill Lynch and the assessment J.P. Morgan was also downgraded. The people at J.P. Morgan forecast a doubling of revenue to $220 million in the third quarter of this year up from $106.8 million a year ago.

Five reasons for their doubts are: competition, the challenge to diversity from the toys business, heavy seasonally of sales, the cost of building three brands (eToys, http://www.babycenter.com/, and http://www.parentcenter.com/) and a shift in product mix from mass-market to specialty and private-label goods.

eToys? extended its position as the Internet?s leading site for kids-oriented commerce, content and services with the launch of its new party and Hobby stores and the introduction of new merchandising features designed to enhance the site?s overall customer experience. The Party Store is a one-stop shop for birthday, holiday and other kids-oriented parties. The Party Store allows eToys? for the first time to tap into the $5 billion kids party goods segment, a fast growing and non-seasonal addition to the company?s product lines. The Hobby Store is stocked with thousands of hobby products including trains, planes, automobiles and rockets. Hobby enthusiasts comprise a $4 billion market in the U.S. and eToys? Hobby Store is designed to make shopping for hobby products easy.

There have been some major alliances between some major competitors for example Amazon.com and Toys ?R? Us, Wal-Mart, Kmart?s Bluelight.com and Target. Last year, Amazon.com?s toys and related business brought in $95 million in sales, comparable to EToys? $107 million. EToys has shifted its product mix to specialty retail and private-label products from traditional mass-market products, which may affect the profitability target. And Wal-Mart has implied that it will keep improving their Web site and may become a major online player by Christmas of 2001.

eToys? received a $40 million revolving credit facility from Foothill Capital Corp. It will use funds from the two-year facility, which is backed by certain company inventory, for working capital and general purpose. The Wall Street Journal said in September that eToys? needed about an additional $100 million to sustain its operations until profitability.

eToys? Inc. entered into an amended agreement with shareholders of its series D convertible preferred stock, according to a Form 8-K filed November 18 with the securities and Exchange Commission. The preferred shareholders waived their rights to enter into a short sale of eToys? stock.

Shareholders also agreed to waive their right to convert the preferred stock at any time if eToys? common stock fell below $3 a share for 10 consecutive days. eToys? common shares originally closed below $3 on Nov. 8, dropping 78 cents to $2.56 a share. Since that time, eToys? shares haven?t closed above $3.

They submitted to the shareholders a conversion election notice for 2,000 shares of the convertible preferred stock. eToys? issued 10,000 shares of the convertible preferred stock. They agreed to provide at least 1,000 preferred shares by Jan. 1 for a conversion to take place after Jan. 31 to shareholders with a conversion option.

Bibliography

VIII. References

http://www.wsj.com

Wall Street Journal

http://www.Excite.com

http://www.eToys.com

http://www.gartner.com

http://www.cbs.marketwatch.com

http://www.quicken.com/news