Financial backing, a requirement that eToys did not have

In the startup environment, it is a habit to talk about successes to keep our hopes alive for the future, but it is a big mistake to forget the failures of the past and not benefit from the experiences of the past. For this purpose, the Ecomotive team has collected the experiences of a series of failed startups, so that reviewing their failed stories may be a basis for the success of new startups in Iran’s startup community. This collection will be published and made available to the audience in the form of the story of failure. We review the thirty-third part of this series, which deals with the story of the failure of the eToys startup.

eToys was founded in 1996 as a children’s idea company in Los Angeles, California, and established distribution centers on the West and East coasts. The website of this company started working in 1997.

eToys, in addition to retailing children’s products (toys, books, software, movies, music, and baby products) in the form of an online store, also provided content and social services to parents, especially inexperienced parents, as well as adults who intend to buy for children. including product reviews, other people’s suggestions, birthday reminders, wish lists, birthday gifts, pre-sale services, product news, and pre- and post-purchase support services.

In 1999, the initial shares of the company – worth 20 dollars each – were publicly offered and it was well received. But things did not go as well as they should have.

Although the company had made a name for itself and became a well-known brand and the first online source of selling toys, they made a big mistake, they had entered the business without the necessary financial resources for the day and recession in the market. Have retail. Therefore, when contrary to expectations, their Christmas 2000 sales did not increase much; Because their financial balance sheet did not have the strength to deal with such a blow. That Christmas, the company failed to deliver some toys, throwing its reputation into question and sending its stock plummeting 70 percent from its peak of $84 three months earlier.

In front of the main competitor of this company; That is, Toys R Us partnered with Amazon in a smart move that summer. —Amazon hosted the toy retailer’s web operations, and the company supplied the toys in return — a move that helped both sides weather tough conditions, the recession and weak holiday season sales.

At the time, these events were not a lesson even for eToys executives and they considered the decline in their Christmas sales to be temporary, but it was not and the failures got bigger and bigger, so much so that they finally put eToys out of business.

On March 7, 2001, The Wall Street Journal reported that KB Toys had purchased most of the assets of eToys during the bankruptcy filing for $5 million.

The eToys website is also operated by eToys Direct Inc. – one of its subsidiaries Parent company– Reopened and continued to market toys under the same old name on the website as well as printed catalogs. On December 22, 2008, the parent company filed for bankruptcy along with nine of its subsidiaries, including eToys Direct, and sold the website to Toys R Us in February 2009.

Analysts believe that the rapid decline of eToys was the result of the company’s ambitious plans and the unfavorable investment climate that began in the spring of 2000 and destroyed many Internet companies.