EToys Shutters UK Site

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Failing online toy seller eToys Inc. will shutter its 15-month-old European operations Jan. 19.


The closure of the site, www.etoys.co.uk, deals yet another deathblow to cash-strapped online retailers left adrift by unforgiving financial markets.


"EToys.co.uk has performed really well, quickly becoming the number one retailer of children's products in the U.K.," said a company statement posted on its site. "But unfortunately, the disappointing recent performance of the company as a whole and the negative market conditions have forced us to close down."


The latest closure comes only 15 months after eToys entered the British market, offering an assortment of toys, PC and video games, software, books, videos and baby products. Orders were fulfilled out of a company warehouse in Belgium.


EToys Europe, as the corporate entity was called, garnered $2.4 million in its first six months of business. Sales doubled during the recent holiday period, and the customer base in Britain grew to more than 90,000.


But the site is far from profitable, despite keeping a lid on customer acquisition costs while boosting order size and gross margin. Like its U.S. counterpart at eToys.com, eToys.co.uk expects fourth-quarter 2000 revenue to fall short of expectations.


In all, the closure will cost 74 jobs. A Grand Closing Down Sale at the British site offers a 50 percent discount through Jan. 19 on all products.


Calls to Ken Ross, spokesman for eToys Inc., were not returned.


This setback is more salt on the wounds of an already foundering online retailer skirting with bankruptcy.


EToys' stock plummeted 72.73 percent to 28 cents a share Dec. 18 after the Santa Monica, CA, retailer said holiday sales were unexpectedly poor. Shares closed yesterday at 7/32, or 22 cents.


EToys estimated on Dec. 15 that net sales for the fourth quarter would hover between $120 million and $130 million. The retailer had said earlier that sales for that quarter would be $210 million to $240 million.


Executives at eToys are now considering a merger, asset sale, cash infusion or financial restructuring before cash runs out March 31. Layoffs are also planned. Goldman, Sachs & Co., which handled eToys' IPO, has been retained to look for a buyer.


"They're running out of cash," warned Seema Williams, senior analyst at Forrester Research, Cambridge, MA. "They're facing tough competition. Competition is getting stronger by the day, and you can't survive very long in that department."


In fact, www.etoys.com lost its No. 1 rank in online traffic this holiday season to Amazon.com, Seattle, and Toys 'R' Us, Paramus, NJ, retailers that recently joined hands to sell toys online.


According to Nielsen//NetRatings, New York, Amazon and Toys 'R' Us led all online retailers during the holiday season with close to six times more visits than their next closest competitor, eToys.


Through their partnership, Amazon and Toys 'R' Us recorded 123 million shopping visits. By contrast, eToys had 21.12 million visits.


The Nielsen//NetRatings Holiday E-Commerce Index measures shopping trips to e-commerce sites in eight product categories by 62,000 users at home and another 8,000 at work.


Williams believes that eToys is ripe for an acquisition.


"Once upon a time, I would have thought Toys 'R' Us [would acquire eToys]," she said. "But, of course, with their deal with Amazon, that makes it an impossibility."


Williams places her bets on traditional, big-brand retailers that could benefit from the spit and polish of an Internet-only retailer.


"General merchants like Target, Kmart and certainly Wal-Mart could use help," she said. "So any one of those general merchants would find great value in eToys' ability to fulfill. It has solid customer service, and it's really good at selling online."

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