Judge Grants Divorce in Amazon/Toys R Us Case
By George Anderson
Like most unions, it started out with a sense of unity and optimism but, as oftentimes happens, the marriage between Amazon.com and Toys R Us was not meant to be.
Yesterday, a Superior Court judge in New Jersey ruled that Amazon had failed to honor its part of the relationship and Toys R Us would be allowed to sever its deal with the online retailer. Discounting an unlikely reconciliation between the parties, Toys R Us will no longer have its web site on an Amazon.com storefront after 90 days.
The dispute between the parties, as with most relationships, grew out of widely divergent expectations. Amazon.com was looking for Toys R Us to stock every toy under the sun and, for its part, Toys R Us wanted absolute exclusivity on everything it sold on the Amazon site.
The question becomes, what will happen now?
While on Amazon, Toys R Us has become the largest online seller of toys. Within 90 days, it will have its toysrus.com URL and customers who only care about whether they can find the toys they want and have them delivered without incident.
Toys R Us spokesperson Kathleen Waugh told the Seattle Post-Intelligencer that the company is committed to maintaining its position as the top online toy seller but that it was premature to discuss what partner or partners the company would be working with once the divorce from Amazon.com was final.
Amazon, for its part, also has decisions to make. Company spokesperson Patty Smith said the company had existing partners, such as eToys and the Discovery Channel, that it could work with.
“They could either go to Target or try to find another toy retailer like K-B Toys,” said Jim Silver, editor in chief of Toy Wishes magazine. “You would think Target first, since it is already their partner, but the one problem with that is Target has its own Web site where it sells toys — and how much will Target want to give up?”
Harry Chevan, the managing director of the investment bank Gruppo, Levey & Co., said, “From a timing standpoint, Amazon is in a good position. To have this happen in March, seven to eight months before the important holiday toy season, gives them time now to get themselves ready, and they have probably already done so … either to develop another relationship or to do it themselves.”
Mr. Silver thinks it unlikely that Amazon would go it alone based on the investment it would require to fit the very same expectations the company had of Toys R Us.
Moderator’s Comment: What does the Amazon and Toys R Us split mean for the respective parties? What impact, if any, do you think this will have on the
online toy retailing market in 2006? –
George Anderson – Moderator