SmarterKids to Open Co-Branded Toy Store on

Educational toy retailer Inc. said yesterday that it would sell products on The Princeton Review's site through a co-branded store.

The deal is set to go into effect this spring. helps assess and match children's educational skills with pertinent resources.

"The logic behind the partnership is that helps parents understand and improve children's academic performance by analyzing the child's level in all academic areas," said Al Noyes, chief operating officer at SmarterKids, Needham, MA. "We have an engine that matches products to a child's skills.", which helps students and schools prepare for state tests, will get a cut of sales made via the SmarterKids store on its site,

Besides, The Princeton Review operates for standardized admissions tests and for finding the right college or graduate school.

The Princeton Review, New York, has offered test preparation and college admissions services for nearly 20 years.

The alliance is SmarterKids' first major deal after saying in November that it will merge with LLC., Monterey, CA, is a cataloger and manufacturer of learning products for the pre-school, elementary and child-care center market.

This merger will help SmarterKids trim marketing costs, add another direct channel and possibly gain more revenue through sales of Earlychildhood's proprietary, higher-margin educational products. The deal is expected to close by spring.

The merger and the deal are indicative of efforts necessary for Internet-only stores to survive in a cyclical toy retail business dominated by traditional multichannel brands and online first-movers.

However alluring the category, the Internet toy store will take a while to become a formidable foe of bricks-and-mortar toy retailers.

Forrester Research, Cambridge, MA, estimates that the Internet in 1999 accounted for $253 million, or 0.9 percent of toys and video games sold across all channels. This year, online sales are projected at $1.4 billion.

Next year, online sales could go up to $2 billion. By 2005, the Internet is expected to account for $3.6 billion, or 11 percent of toys sold across all channels.

But unforgiving capital markets are not sparing even of first-movers or popular online brands in the toy retail business.

For instance, Walt Disney Co.'s and Viacom's Red Rocket were among last year's notable casualties. Mall retailer KB Toys' site cut staff and Zany Brainy Inc. brought its online toy store inhouse. Even Toys 'R' Us Inc., the No. 2 offline toy retailer, had to partner with for a jointly run

EToys Inc., Santa Monica, CA, until recently the online leader in toy sales, is another case in point. Unable to raise additional funds, eToys said Monday that it had slashed all jobs and had little hope of surviving beyond this quarter.

SmarterKids, which is much smaller than eToys and has been online since 1998, has nearly 300,000 customers who buy educational toys, books, games and software. It has more than 160,000 children's learning profiles registered on the site,

Partnerships with companies such as The Princeton Review's not only will shore up SmarterKids' bottom line, but also will give it access to a wider audience and will leverage a compatible customer database.

"We basically help their customers take action based upon the insights they derive from the Web site," Noyes said.

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