German Internet Toy Shops Face Consolidation

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Consolidation of the online toy business in Germany continues as the big bricks-and-mortar stores snap up pure Web players that had trouble surviving a shaky Christmas business.

Otto Versand bought earlier this year. had sales of 17 million deutsche marks (about $8 million at current exchange rates) last year, up 500 percent from 1999. More than half that total came in the fourth quarter.

Otto first took a 20 percent stake in the firm last year and upped it to 40 percent before buying a controlling 75 percent of shares.

One reason that founders sold was to take advantage of synergies in purchasing, marketing and logistics through Otto's Hermes Versand service, which has a nationwide transportation system in place.

For Otto, the addition of toys to its offerings was a natural extension of the company's online business, said spokeswoman Christina Ziegfeld. Otto had sent a MyToys insert to its catalog customers.

Toyzone AG, another struggling Internet shop, found a white knight in Primus Online, the Internet division of the Metro Group, one of Germany's largest retail chains.

The e-tailer had already added RTL and SuperRTL as strategic partners last year. The two companies are TV stations controlled by media giant Bertelsmann.

Primus will offer ToyZone support similar to what Otto is giving MyToys -- product sourcing, distribution, logistics and, presumably, an infusion of new cash.

Neither company made public the details of the transaction or how much money was involved. But analysts said both acquisitions signaled the continuation of such takeovers on the German Internet market.


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