eToys (fka eTys)

[sock]

Key Q&A from the interview:::::::::
http://discuss.washingtonpost.com/zforum/00/walker1116.htm

Leslie Walker's .com Live
Discussion with eToys CEO Edward "Toby" Lenk.


Leslie Walker: Hello to everyone and welcome to Toby Lenk of eToys. Let's go to the questions.



It’s a rough time for etailing, with another high-profile .com closing almost every day. Some analysts think pure-play Internet retailers won’t last. What is eToys doing differently from the dying .coms that will help it survive?

Edward Toby Lenk: Most dying .coms have little revenue, little brand share, and no business models. eToys has a considerable amount of all three. That said, the climate is difficult for all .coms, for sure.
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Atlanta, Georgia: Does eToys still have a relationship with Fingerhut?

Edward Toby Lenk: We no longer have a relationship with Fingerhut. We have added 2 mil square feet of new warehouse capacity, and have been 100% in-house in our fulfillment since the Spring. Last Holiday season, we were about 50% in-house.
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College Park MD: Do you have any exclusive arrangment with manufacturers that would give you an edge in supply over rivals.

Edward Toby Lenk: We have thousands of unique and less well distributed products. We are the exlcusive online distributor of Discovery Toys, for exammple. Thousands of our products are not contractual exclusives, but "effective" exclusives, in that mass retailers cannot or will not carry them. On things like Barbie, we carry virtually every item offered, whereas mass retailers carry the TV promoted ones -- a limited range.
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washingtonpost.com: Can you discuss your fulfillment capacity? This was a big issue last year with toys not making it in time for the 25th. What have you done to improve distribution over the past year and what is the final cut off date for an order to be delivered by Christmas.

Edward Toby Lenk: Some people in the kids space performed horribly and gave the sector a black-eye. We performed quite well and were rated the #1 online retailer for the holiday in a major study published in Fortune. That said, we strive for perfection and we weren't perfect. Every year we do things to get better and better. This year will be our best ever in customer service, since we have expanded our in-house capacity roughly 10x to 2 million feet of warehouse space.
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Columbus, OH: There have been mixed messages about profitability--I've heard 2002, 2004, and so on. When will you be profitable, and do you foresee any problems raising enough cash to get there?

Edward Toby Lenk: There has been no mixed message from us on profitability. We have been very clear. We are targeting being very near operating profit breakeven next holiday (2001), and profitable the year after (2002)on a full-year basis.
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DC: Regarding the TRU/Amazon partnership, would you say it is a concern to your business, that you will maintain your #1 position, or that there is room for more than one player in this field?

Edward Toby Lenk: We are targeting $110 bil of retail spending on children. Our biggest competition is traditional spending in physical stores. There is huge room for 2 online kids retailers to do well. We always assumed we would compete with TRU.com. The advantage we have is that we do not have channel conflict -- all of our best efforts and products go online
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Rosslyn VA: What types of changes do you see in etailing say five to ten years from now? A lot of people - including myself - think that the reason that e-tailers are going under isn't because the idea of selling stuff online is bad idea, but that the technology and customer base was not really ready for the push that these dotcoms made last year. I would appreciate your thoughts.

Edward Toby Lenk: I believe that customers are ready, and many online companies were not. Very few online or traditional companies have good web sites, and good web service. Very few. That is because this is a whole new thing, and requires whole new merchandising skills, technology, and logistics expertise. The good get better and better. This is our 4th Holiday season, and we could not be where we are without the tremendous learning and investment over the past three seasons. We have never been as prepared as we are right now.
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Leslie Walker: Please tell us about your marketing budget, and what, if any, kind of discounted and free shipping you'll offer this season. Last season you reportedly spent around $33 per customer acquired--how about this time?

Edward Toby Lenk: We expect to spend absolute dollars comparable to last year, but advertising will come down significantly as a % of sales as we expect strong sales growth versus last year. We don't put out forward statements on the specific "customer acquisition cost" measure, but we expect to remain one of the most efficient in the online world.
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CHICAGO, IL: When will eToys begin to release information on the seasonal volume increase. Has your increase started and is it as expected, or a little slower this year?

Edward Toby Lenk: We historically have not released information within a quarter. We certainly see consumer interest building in October and so far in November
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Leslie Walker: Amazon's been offering free shipping on big toy orders--any chance you will too?

Edward Toby Lenk: We generally offer great prices, great content and suggestions (a giant idea and suggestion factory!), and great service. Generally, free shipping and other very "deep" promotions are used as a substitute when you don't have these things. Also, just to clarify, their offer is for orders over $100, which will not be relevant to most of their customers
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