Toys R US and Amazon Split Appears Certain

Discussion
May 25, 2006
George Anderson

By George Anderson


Nick and Jessica, Sir Paul and Heather, and now Toys R Us and Amazon have made it official. Their romance and relationship are over – done.


Toys R Us, which previously won the right to end its agreement with Amazon because of the online giant’s failure to provide the exclusivity spelled out in the 10-year deal between
the two companies, has chosen GSI Commerce to provide the necessary technology and customer service required to operate Toysrus.com.


Amazon, it should be noted, has appealed the earlier ruling but Toys R Us’ decision to push ahead with its web site with another company suggests that it is confident of the
previous court ruling being upheld.


The split between the two companies is a blow to Amazon and a decision that involves risks for Toys R Us.


Patti Freeman Evans, a senior analyst at JupiterResearch, told The Star-Ledger of Newark, NJ, “Toys ‘R’ Us provides a lot of business for them (Amazon) and nobody wants
to walk away from that business. The change, whatever it ends up being, provides both (companies) peril and opportunity.”


Nita Rollins, director of thought leadership at Resource Interactive, said Toys R Us has a clear opportunity to use its web site to bring its retail banners to prominence once
again.


“People expect Toys ‘R’ Us sites to remind them of the stores, of the experience of playing with toys, and that’s not what you get on Amazon,” she said.


Regardless of how the legal wrangling of the Toys R Us/Amazon saga ultimately plays out, it would appear that there is one clear winner in all of this – GSI Commerce.


The company’s win of the Toys R Us business is one in a number of successes. GSI, reports The Seattle Times, manages and provides customer service for the web sites of
60 companies and groups including Burberry, Major League Baseball, NASCAR and Polo.com.


Forrester Research analyst Carrie Johnson said GSI’s number of clients gives it an advantage over Amazon.


“[Amazon] hasn’t reached that kind of scale yet where they can be very competitive,” she said. 


Moderator’s Comment: What do Toys R Us and Amazon need to do now that the split between the two companies is nearly
official? Do you see more retailers going to outsourcing functions such as web site management, customer service and order fulfillment?

George Anderson – Moderator

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3 Comments on "Toys R US and Amazon Split Appears Certain"


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Robert Antall
Guest
Robert Antall
14 years 9 months ago

Outsourcing the website makes a lot of sense because the creation, operation and maintenance of a quality site requires expertise and talent that is highly specialized, expensive, and necessary only periodically. Building the “fault tolerant” technical environment is technically complex and cost prohibitive for all but the largest retailers. Furthermore, while growing, eCommerce is still a small percentage of the business for most brick and mortar retailers, so it is difficult to devote the resources necessary to such a small piece of the enterprise, regardless of it strategic importance or growth. Outsourcing this to a company like GSI who has the core competencies to support a successful website makes sense for a lot of companies.

Customer service and fulfillment is another ballgame altogether, however. These activities should be core competencies of multichannel retailers. If they are not, outsourcing these will result in a third party performing key customer relationship functions, usually not as well as the retailer.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 9 months ago

It’s time somebody substantial flew the coop over at Amazon, and my fingers are crossed for TRU. As Nita Rollins said, the site needs to remind shoppers of the stores – which is what comes to most of our minds when we think of TRU.

Success spawns competitors, and as much as I admire and use Amazon, I relish seeing them challenged. Better service and prices for all of us. I hope more retailers follow TRU’s lead.

Mark Lilien
Guest
14 years 9 months ago

Amazon is one of the best capitalized businesses in the world. Certainly they could buy GSI if they wanted to. It might be a decent fit, since Amazon’s traffic-generating ability is outstanding.

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