Battle online: KBToys is making aggressive moves for its Web site, as rivals up the ante

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KBToys, which is making an aggressive move into online sales, this week is expected to name Goldberg Moser O'Neill, San Francisco, as first agency for an account estimated to grow to $30 million to $40 million.

The Consolidated Stores chain, one of the nation's leading toy retailers, also considered Hampel/Stefanides and BBDO Worldwide for the account.

A separate review continues for an additional $10 million in online spending, with the contenders including Miller Huber, San Francisco, an agency that often works with Goldberg clients. CEO Srikant Srinivasan said the company "is still in the middle of a review, and we haven't made a decision."

Western Initiative Media Worldwide, West Hollywood, Calif., is expected to continue to handle media buying.

KBToys recently acquired, an online site that combines information about toys with sales. It has been merged with KBToys' original Web site.

Part of the KB goal is to position its site--under this or another name--for a public offering of stock, said one executive familiar with the plans.


The moves come amid a sea change in the selling of toys. Toys "R" Us, the longtime industry leader, dropped to No. 2 behind Wal-Mart Stores, with other discounters such as Kmart Corp. and Target Stores not far behind. Even though it's the No. 2 toys-only retail brand, KB's sales of $1.6 billion are far behind Toys "R" Us' global revenues of $11.2 billion for the fiscal year ended Jan. 30.

Toys "R" Us recently named Leo Burnett USA, Chicago, as its new agency and is developing a fresh campaign for fall.

Traditional retailers received a wakeup call in the 1998 holiday season, when startup EToys made a strong play in the market. So the giants are scrambling to create strong e-commerce units. Another threat comes from, reportedly planning to move aggressively into the toy area.

In April, Toys "R" Us secured funding via Benchmark Capital for a new unit and distribution center. Though late to the Web, Toys "R" Us said it intends to be "the clear leader in the online retail market for toys and children's products."

EToys, which for a time had a public stock worth greater than that of Toys "R" Us, fell back to a market valuation of $3.8 billion by last week. That's a bit more than Consolidated's $3.6 billion, but below Toys "R" Us' $5.4 billion.

KBToys differentiates itself from Toys "R" Us by selling small, boxed toys and by its locations in some 1,400 malls nationwide. The chain has "the best location and assortment and . . . good friends in the mall who will shop on the Internet," said Walter Loeb, a retail analyst and publisher of The Loeb Retail Letter.


The KBToys win was Goldberg's second last week. The agency, which also handles George Lucas' gaming division, picked up Lucas Learning, a developer of software learning products centered on "Star Wars" adventures. The company will launch two new titles this summer.

There was no previous agency. Spending is estimated in the $3 million to $5 million range.

Contributing: Bradley Johnson

Copyright June 1999, Crain Communications Inc.

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