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'Net Insider:

Too dumb or too smart?

By Scott Bradner
Network World, 01/24/00            

A week before Christmas, Toys 'R' Us announced that it was not going to be able to deliver all the toys that had been ordered over the Web in time for Christmas morning. The TV news shows played the story for all it was worth - and more - giving Toys 'R' Us quite a black eye. But if I put on my conspiracy theory hat, this sequence of events makes a lot of sense.

The way the story was painted, Toys 'R' Us was so dumb or had such a bad software system that the retailer kept accepting orders long after it should have been clear that the company was not going to be able to deliver what had been ordered. This was the lead story on most of the local and national news shows and a front-page story in many newspapers on the day of the announcement. It also popped up from time to time over the next few days. It would have been hard for anyone to avoid hearing about this failure of e-commerce. As penitence, Toys 'R' Us offered $100 coupons, redeemable at its stores, to those who got caught up in the mess.

Toys 'R' Us was not alone in accepting orders in excess of the company's ability to deliver the goods. But it was the company that made the biggest splash when it had to admit its inability to produce. The image of Santa not showing up for some little kid is a strong one.

So let's look at this situation through Machiavellian-colored glasses. Toys 'R' Us has a lot of brick-and-mortar stores that pay rent and employ a lot of people. Sales over the 'Net can cannibalize sales in these physical stores. Toys 'R' Us may feel that it cannot ignore the 'Net, but the company must feel as though it is in quite a quandary: a sale over the 'Net may just cost the retailer more - when the whole corporation is considered - than Toys 'R' Us makes in profit off of the sale.

So what better way to slow down the explosive growth in 'Net sales than to make potential users of e-stores nervous that they will not get their goods? What better way to do that than to have a very high-profile failure of e-commerce? And, just to complete the conspiracy scenario, what better way to ensure that those nervous customers know the location of local Toys 'R' Us stores than to bribe them with a coupon that can only be redeemed in a physical store?

Maybe Toys 'R' Us is not smart enough to do this, but if I were the company, I'm not sure I'd want to admit that to myself.

Disclaimer: I do not know that the Harvard Business School teaches Machiavellian principles, so the above scenario is my own.

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