Nine years ago the two retailers signed a 10-year agreement giving Toys “R” Us exclusive rights to sell certain toys on Amazon.com’s Web site. It was a way to boost online toy sales for both vendors.
The Dot-com era deal allowed Toys “R” Us to establish a foothold in the nascent online retail market selling its wares on the already-established Amazon.com, while Amazon saw the partnership as a way to expand into new product lines without having to stock and market everything itself.
But in 2004, Toys “R” Us sued Amazon for breach of contract, claiming that the online retailer violated the agreement by allowing other third-party merchants to sell toys and children’s products on its Web site. In turn, Amazon countered by alleging that Toys “R” Us failed to keep products and toys in stock, discouraging potential customers.
But a New Jersey judge three years ago ruled that Amazon had indeed breached the contract and ordered the Seattle, Wash.-based company to pay Toys “R” Us an undisclosed amount of damages. The two companies ended their alliance and have been in legal disputes regarding the matter until this weekend.
World of Toys
Today, the Wayne, N.J.-based Toys “R” Us is a private company after a leveraged buyout in 2005 from a private equity consortium led by Bain Capital and Kohlberg Kravis Roberts & Co. The company operates more than 1,000 stores in 35 countries.
Last month Toys “R” Us completed its acquisition of upscale toy retailer FAO Schwartz for an undisclosed amount. The store is famous for its 5th Avenue flagship store in the GM Building in New York City.
FAO has two stores located in New York and Las Vegas, Nevada, both of which Toys “R” Us said it would keep open.
The global toy industry has suffered recently. Market research firm NPD Group said 2008 toy industry sales declined 3 percent from 2007. Faced with the recent Chinese lead-paint scare in toys and consumers tightening their budgets, toy sales in 2009 are expected to decline further.
To capitalize the recession sentiment, Toys “R” Us recently introduced “$1-$2-$2 Fun” mini shops near the front of its store locations. These mini shops only sell value items such as puzzles, jewelry, and small toys that cost $3 or less.
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