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Who Needs 'Em?

Benefits Of E-Tailing

"EToys' first order was for only six games," says Winchell. "When I talked to retailers, they were looking at stocking dozens of stores and were afraid of the risk. They wanted to stay with proven sellers-games with licensed TV characters or games that were heavily promoted." Internet retailers, on the other hand, work to set themselves apart from the big boxes by carrying specialty toys not generally available elsewhere.

That's not the only reason why e-tailers make good sales channels for inventors. For one thing, they offer unlimited sales space. A traditional retailer, on the other hand, has a limited amount of shelf space and has to drop one product if it decides to carry another. The big stores end up comparing products and choosing the ones they believe will sell more units. Virtual retailers, in contrast, can add as many products as they like.

Another big difference between the two is inventory. E-tailers can carry limited inventory, and in some cases, even have orders shipped directly from the vendors. Regular retailers, however, may be required to buy $10,000 or more of a single product in order to stock their inventories. Because the risk is less, Internet retailers are more willing to take the chance on new products.

"I won several awards and endorsements for Conscience, including 'Dr. Toy's Best Children's Vacation Product for 1998' [from a newspaper column that rates new toys] and the National Parenting Center's 'Seal of Approval.' " Winchell knows getting this information to consumers is crucial-and e-tailers can immediately post these kinds of honors on their sites. But when dealing with retail stores, Winchell has to put stickers on each box noting the awards he wins and then wait for retailers to reorder. Getting the word out to catalog buyers is even worse. Catalog publishers decide on new products in March or April for catalogs that are mailed in October or November. News about awards can take quite a while to reach customers.

"At one time, eToys listed Conscience first in its family-toy category," Winchell says. "That was because the product was selling." Internet sites respond immediately to hot-selling products. Retailers, on the other hand, sometimes fail to observe that products have sold out, and catalog companies can't really do much to highlight the hot products until the next catalog comes out. Winchell feels that because the Internet sites that sold his product responded so quickly, "Conscience [had] an opportunity to build on its success."

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This article was originally published in the July 2000 print edition of Entrepreneur with the headline: Who Needs 'Em?.

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