An Example of an E-Commerce Failure and its Causes

There are extremely successful virtual e-commerce companies such as eBay, Google, or Yahoo! in recent years. However, there are large numbers of e-commerce companies that are unable to maintain their profit through e-commerce. Some well-known business-to-consumers (B2C) failures include Pets.com, Xpeditor, Chemdex.com, Webvan.com, Boo.com, Furniture.com, Bid.com, Petstore.com and so on.

eToys.com is one of the top 10 dot-com flops. Etoys.com was launched in 1997, and it was founded by the CEO, who name Toby Lenk, COO Frank Han and Idealab Founder Bill Gross. eToys filed for an initial public offering (IPO) valued at $115 million in February 1999. However, eToys delayed the IPO due to the acquisition of BabyCenter Inc., announced in April 1999. EToys seem like the best idea for those busy parents; it offered them a chance to order thousands of toys in every category from the comfort of their homes. Beside that, the site also had fun features, the features including gift recommendations by age and information about popular characters, from Madeline to Barney.

On May 20, 1999, eToys opened the sale of stock to the public. This helped generate praise for the online toy category. Despite the positives, eToys suffered a black eye after it failed to deliver some orders in time for Christmas 1999. eToys’ lead was put in jeopardy after major competitive of eToys; Toys “R” Us and Amazon.com formed a partnership in August 2000.

The cause of failure is competitive environment. The eToys was competing with the companies such as Toys R’ Us that had not only an online presence, but also the perceived stable infrastructure of bricks and mortal. eToys.com strategy to offer more diverse products conflicted with the strong “toy store” branding they had created. The price wars and high customer acquisition costs also caused problem for this e-tailer.

Another cause of eToys.com failure in e-commerce is because of ineffective customer service or misinformation about products and services, such as failed to deliver the order on time would destroy the image of the company, and the first impression of new customers. In addition, the negative response from customers is also another cause which will lead the dot-com filed into bankruptcy in E-business.

However, e-Toys. com was reborn in October 2001 as a subsidiary of KB Toys. In 2004, eToys separated form KB Toys