Toys R Us

These past few years haven't quite been all fun and games for John Eyler, chairman and CEO of Toys "R" Us. Shortly after joining the company in January 2000, Eyler set about revamping Toys "R" Us to better compete in the marketplace while brushing up the company's image. But a downturn in the economy together with the effects of 9/11, not to mention the West Coast port lockout, wasn't part of the plan.

Although he still has considerable work ahead of him, Eyler's efforts appear to be paying off. Total sales were up two percent for both the second quarter and the first six months of 2002, compared to the previous year, and results for the entire year should likewise prove relatively strong. The company credits "careful attention to inventory management combined with very strong expense controls" for the positive numbers. Customers, however, are impressed with the improved service, remodeled stores, and price cuts on hundreds of toys.

Part of the company's successful turnaround lays in the partnership its Toysrus.com unit formed with Amazon.com just over two years ago to sell toys online. Under the agreement, Amazon.com is responsible for handling all orders, including shipping and customer service, for Toysrus.com. The primary responsibility of Toysrus.com is to choose the toys to offer online and make sure there's plenty of available stock.

Both companies will face challenges, however. For Amazon.com, the test will be to make sure its complex fulfillment systems integrate seamlessly with Toysrus.com's. The eTailer must also coordinate the tricky placement of products in distribution centers to avoid cost overruns. Toysrus.com is faced with finding the right balance between supplying Toys "R" Us stores and the web site with "hot" toys, so as not to disappoint customers. Furthermore, to make orders profitable, it must get people to buy multiple products.

The venture has also helped build both companies' brand names and extend their reach into the marketplace. According to John Barbour, president of Toys "R" Us International, and one of the executives who played a pivotal role in creating the partnership, about 1.8 million people pass through Toys "R" Us stores during the holiday period. At the same time, Amazon.com's web site gets 23 million visitors--a huge customer base that Toys