Amazon Seeks Divorce, $750M from Toys R Us

theodp writes "Responding to a Toys R Us lawsuit accusing Amazon of breaching exclusivity provisions of its $50M-a- year tenancy agreement, Amazon has countersued the giant toy retailer, asking the Court to terminate its Toysrus.com partnership and award it damages of more than $750M, arguing that Toysrus.com's failure to effectively choose top toys and baby products and to keep products in stock leaves Amazon with no other choice but to enable more sellers to sell these products."

Comments

Why can't they learn to play nice and share?

[Anonymous Coward]

Why can't they learn to play nice and share?

Re:Why can't they learn to play nice and share?

[Joey Patterson]

Kindergarten may have taught them to "do unto others as you would have them do unto you," but that kind of thinking just doesn't work in the courtroom.

Somebody's going to have to sit in the time-out chair.

divorce..

[manavendra]

plenty of people across the world will tell you, the only people to benefit from divorce are the lawyers..but i guess, if the bedfellows can't see each other eye to eye, then there is no choice but to go different ways

how much does amazon claim it lost because of this partnership though? $750 M sounds a bit too high to me, even for this "exclusivity" partnership..

Re:divorce..

[Pieroxy]

The issue is that Amazon broke the contract first. I guess Amazon is teh s0x0r in that case...

The fact that a party doesn't respect his piece of the contract is no reason to not respect yours. It is a reason to break the contract, but until it's broken, you got to respect it...

Looks like Amazon will have a hard time proving that TRU didn't respect his piece...

Re:divorce..

[Iffy Bonzoolie]

Or, people who divorce could actually try to settle things amicably without lawyers. There are books on how to do your own divorce, and as long as both sides are somewhat rational (which is generally the problem, I think), they can agree on a settlement themselves.

-If

Re:divorce..

[dnoyeb]

Yea, Amazon's position is rediculously lame. Toys R Us didn't pick good toys? Yea, they been around so very long and they can't pick good toys to Amazon's standards.

amazon's about to get waxed.

Re:divorce..

[Anonymous Coward]

as long as both sides are somewhat rational (which is generally the problem, I think)
You are totally correct, since most marriages contain a woman.

Re:divorce..

[xQx]

ROFL!

+5 funny.

Re:divorce..

[Anonymous Coward]

From what I know from inside, they can't. Picking toys to go into the warehouses for an online site like Amazon's vs. a retail store is actually pretty different.

Re:divorce..

[Anonymous Coward]

i dunno ... have you been in a tru lately? i was in one last week and it was pretty lame (somewhat disorganised, quite dirty, poor selection). it's really gone downhill in the last 10 years or so, imo.

No fun being on a sinking ship

[erick99]

Toys R Us is a company that is failing against it's competition, particularly WalMart, and Amazon knows it. Amazon doesn't want to be on a sinking ship so they break/bend the rules and then, when Toys R Us crys "foul," Amazon says, well, uh, "they suck at choosing toys and we have lawyers too...so there." Stupidity versus greed. Good old fashioned contest with no real winners.

Happy Trails!

Erick

Re:No fun being on a sinking ship

[AEton]

There is a winner: the consumer. The breakup of such an anticompetitive relationship is an example of the "invisible hand" of the marketplace restoring free-market capitalism to where it belongs. The end result is that prices and amount of items sold both move toward an equilibrium established by what people are willing to pay and what suppliers and stores are willing to charge.

That's the big picture. It's nice to see a market that isn't so dominated by monopolies (yet: Wal-Mart is scary) acting in jerky but understandable ways.

Re:No fun being on a sinking ship

[brandonY]

Ah, but see, their new exclusive toy seller may be Wal-mart.

Re:No fun being on a sinking ship

[irc.goatse.cx troll]

"There is a winner: the consumer. The breakup of such an anticompetitive relationship is an example of the "invisible hand" of the marketplace restoring free-market capitalism to where it belongs."

I somewhat disagree, amazons anticompetitive behavior is great for the consumer. I was searching for a movie (Waking Life) and due to a deal with borders, I was able to reserve a copy of the movie at any of the local borders stores (with addresses listed, along with how far away it is).

These kind of features are what makes amazon successful, sure we'd be better off with an open system so prices stay competitive, but until someone (pricewatch? pricegrabber? froogle?) steps up and opens up a system that actually has the whole process bundled in one easy to use page, don't expect amazon to stop dominating any time soon.

Re:No fun being on a sinking ship

[mumblestheclown]

You have told a nice story. It makes sense; it's logical. It's also full of shit. It's a complete invention that you made up to tell a story that fits your world view. Unfortunately, your world view is not the real world.

Do a tiny bit of research on Toys R Us stock price over the last 5 years. Yes, it went up during the dot com days and then fell back down, but other than that it has been remarkably steady. Clearly, it is no 'sinking ship.' Actually, it is the best brand in toy retailing and the category leader there, having beaten the living snot out of Kaybee Toys, Kiddie City, and others over the years.

To call Toys-R-Us stupid is just you telling a story that does not exist; or, at least, the facts don't seem to bear it out.

You may be right about the amazon greed bit though; they did not seem to consider that a mutual exclusivity contract can cut both ways..

Re:No fun being on a sinking ship

[Anonymous Coward]

It won't be long before Amazon is losing ground against mega retailers online (Wal-Mart).

Why in the world would Amazon purposely get rid of friends when facing the prospect of going head to head with Wal-Mart online. If I were Amazon I'd wanna be making deals with all kinds of brick & mortar retailers.

Re:No fun being on a sinking ship

[man_ls]

It has to be a sinking ship because 5 TRU locations I was aware of previously are all boarded up abandon wrecks now.

I don't know of a single brick and mortar TRU location nearby any more.

Re:No fun being on a sinking ship

[bdptcob]

I'm going to have to agree. I worked for a company that handled the phone based orders about four years ago. They were constantly out of stock on their product.

Re:No fun being on a sinking ship

[ErikZ]

Even if they had no competition I wouldn't go to Toys R Us. The last time I was there, there were no prices posted.

I don't care if there are scanners located throughout the store. I want to know how much something costs when I look at it.

Re:No fun being on a sinking ship

[Anonymous Coward]

I read several years back how TRU was to consolidate their stores all into one, the other 2 being Kids R Us (mainly a clothing store for youngin's) and Babies R Us (Well a store all about baby supplies).

It was a restructuring deal that was going on at the time but i honestly never saw it come to fruition. In a shopping district close to me they had all 3 stores located within a 5 mile radius of each other. Both ToysRU and KidsRU closed down and boarded up. But BabiesRU is still selling the baby goods and never has diversified into offering what the other 2 stores sold.

But look back (into the 80's) at how quickly Lionel Playworld (precursor to TRU who at the end was bought by TRU) went under when it became outsold by the mega-retailers of its time like Zayre's, Richway, and Kmart. TRU was expanding nationwide with new venture capital and was able to push them out and buy them up at the end. Now it seems to be coming full circle.

With brick and morter stores from now and forever its going to be they come and they go. One kills off and buys up the next, rinse, repeat. Even Sears, being THE oldest national retailer in the US has had to consolidate, restucture, close down, and rebuild numerous times throughout the years to survive. I think its all associated with the process of store, business model, or shopping demographic aging through the times in some form.

Wal*Mart as it stands has embarked on trying to outrun the beast by closing down stores when they get old and building brand new ones nearby. We are about to be on our 3rd area Wal*Mart in 20 years here where i live. Going from Wal*Mart, to Super Wal*Mart, to Super Meglomania Wal*Mart. Trust me, I know, they just bought the 220 acres of pristine woodlands behind my parents house to pave over for the new incarnation at which i can say i will see abondoned in 8-12 years.

Re:No fun being on a sinking ship

[Anonymous Coward]

"It has to be a sinking ship because 5 TRU locations I was aware of previously are all boarded up abandon wrecks now."
That proves nothing - maybe you live in Iraq.

Since when does exclusive not mean exclusive?

[jmichaelg]

Amazon takes $200 Million over 4 years from Toysrus in exchange for exclusively listing Toysrus' stock and then decides that Toysrus isn't keeping up its end of the deal? Based on the what's in the articles, which may not be correct, if Amazon is upset that Toysrus isn't stocking enough goods, it's Amazon's tough luck. Amazon should have exercised due diligence and made sure that Toysrus was going to be able to stock goods and Toysrus' purchasing department knew what to stock before accepting the deal.

A deal is a deal - at least it used to be back when we knew the definition of "is."

Re:Since when does exclusive not mean exclusive?

[synx]

What did the contract say exactly? "Exclusive" can mean several things. Apparently the deal was to maintain exclusivity in SKU, not product line. I guess Amazon's defense is that they didn't have someone else sell the same SKU, but was in the same category.

Re:Since when does exclusive not mean exclusive?

[bezuwork's friend]

A deal is a deal - at least it used to be back when we knew the definition of "is."

The first question is whether Toys-R-Us violated any contract terms by it's behavior such as not having toys in stock or whatever. If so, Amazon may have a good position.

Even without a direct contract violation, the courts have a concept of "best efforts" which might apply. To my knowledge, the concept of best efforts was first used in a Lucy Lady Duff-Gordon case where the exclusive US licensee was required to use it's best efforts to make profits. Since Toys-R-Us had an exclusive right to sell toys on Amazon, maybe the same doctrine would apply.

Re:Since when does exclusive not mean exclusive?

[PleaseDontBeTaken]

Reasonable start.

However, it's also true that Toys'R'Us probably would rather sell more toys than fewer. They probably tried their "best." And selling more toys is not necessarily good business if you have to take too much inventory risk to do it, anyway.

It doesn't have to be the best qualified person's best efforts. Just theirs, even if they are not the most qualified. It's kind of like the right to counsel in that respect.

Re:Since when does exclusive not mean exclusive?

[Anonymous Coward]

Plus, if TRU didn't have the SKU then they how could they exclusively supply it? Sounds like they weren't keeping up their end of the deal - or at least I bet a lawyer could argue that way.

Re:Since when does exclusive not mean exclusive?

[H09N0X10U5]

Amazon should have exercised due diligence and made sure that Toysrus was going to be able to stock goods and Toysrus' purchasing department knew what to stock before accepting the deal.

I'm guessing here, but contracts usually include something called a service level agreement that includes stuff like that.

A deal is a deal

Oh purleeease! Grow up already. If you knew anything, you'd have written "a contract is a contract" and you'd also know that if one party doesn't uphold their end, the other party has grounds to withdraw from it too (subject to various whys and wherefores).

Re:Since when does exclusive not mean exclusive?

[Anonymous Coward]

What does Sports Knowledge Undergound have to do with all of this?

Anyone wanna bet

[proverbialcow]

...that the "other" company is Target? It makes sense; T'r'U can't keep high-demand toys in stock, so Amazon lets Target sells toys in violation of its exclusivity agreement.

Hell, with the $3.6 BILLION Target's getting for marshall Fields, I wouldn't be surprised if Target bought Amazon.

Re:Anyone wanna bet

[kfg]

And by relying on multiple vendors Amazon gives the appearance of being able to always keep toys in stock.

Here's the thing though, Target can't keep toys in stock either, nor can Wal-Mart. No single vendor can. Amazon had every reason to realize this up front. Amazon can't keep all of its own product in stock. The issue is that Amazon was payed for an exclusive relationship, which has nothing to do with keeping things in stock for Amazon's benefit. Amazon's benefit is in receiving the $50 mil a year without having to sell a damned thing from Toys (the symbol formerly knows as "R") Us.

Amazon has decided that it was a bad deal after the fact, they've learned the perils of vendor lock in, but they want to keep the money anyway and break the deal to deal with it, what's more, when their vendor objects to this they ask for even more money for "compensation" for themselves having violated the contract.

Having made a bad deal is not grounds for breaking a contract. Thousands of companies have been forced into bankruptcy by the courts enforcing bad deals. It happens to building contractors all the time. You submitted the bid Sparky. Now you have to live up to it. It isn't the contractee's fault that you cut your margins unrealisticly.

SCO obviously has enough legal crack to share.

BAD Amazon. No cassava meal donut.

KFG

Re:Anyone wanna bet

[LostCluster]

The Toys 'R Us-Amazon partnership started after the 1999 holiday season failure of ToysRUs.com because the .com operation accepted every order attempted and simply sent backorder notices... meaning many parents got caught with orders that wouldn't be filled until after Dec. 25, and as result the company had to rush out gift cards so that parents could pick up something at the retail stores to avoid making a mess of their whole brand in the process.

Re:Anyone wanna bet

[balbeir]

One of the differences between Target and Toysrus seems to be their shipping rates. I recently tried to order something from Toysrus that cost about $70 and they tried to charge $90 for shipping. Pretty ridiculous. Target shipped the same thing for about $20.
Looks like someone is not getting the concept of an online store at Toysrus.

Re:Anyone wanna bet

[Anonymous Coward]

The issue is that Amazon was payed for an exclusive relationship, which has nothing to do with keeping things in stock for Amazon's benefit.

No, Amazon was paid

- Protecting language from idiots since 1984

Re:Anyone wanna bet

[stilwebm]

Hell, with the $3.6 BILLION Target's getting for marshall Fields, I wouldn't be surprised if Target bought Amazon.

Given Amazon's market capitalization of $20.98 Billion, I think that's a pretty silly idea. Target, for comparison, has a market cap of $40.60 Billion. It's kind of amusing, though, to see Target's P/E of 21.15 compared with Amazon's P/E of 143.49.

http://finance.yahoo.com/q?s=TGT,AMZN&d=s

Re:Anyone wanna bet

[kfg]

Yes, another reason why Amazon had every reason to know what they were getting into.

I'll give Amazon this though, they do seem to know how to run a store. I've ordered a number of back ordered items from them, and even a couple of "front ordered" items, and they properly tell me up front that the item is not currently in stock, when I might expect it if they know, and that they don't know if they don't.

I wish they were a hair less legally repulsive.

KFG

Re:Anyone wanna bet

[Anonymous Coward]

You probably should terminate those sentences with punctucation, such as a period or exclamation mark.

Re:Anyone wanna bet

[kfg]

No, Amazon was paid

- Protecting language from idiots since 1984

From dictionary.com:

payed v. A past tense and a past participle of pay.

KFG

Re:Anyone wanna bet

[tabrisnet]

Your point? Unfortunately for you, if you look up 'pay' in dictionary.com, and look for the 'past tense and a past participle of pay' you get BOTH 'payed' and 'paid'. So if you were arguing over spelling... your point has been totally lost.

v. tr. 10. Past tense and past participle paid or payed (pd)

If you are making some argument over the meaning of 'pay' then you have also lost your audience by not explaining your nitpick.

We would all be better served by your explanation of your nitpick rather than leaving it fully open for misinterpretation.

Re:Anyone wanna bet

[proverbialcow]

Market capitalization is just one piece of the puzzle. Taking a look at Amazon's financials, they've got about $2.1 billion in assests, $3.2 billion in outstanding liability and another $1 billion in shareholder equity. From where I stand, that's still $2.1 billion in the hole.

Also, that $3.6 billion for Marshall Fields is cash. For fifty+ profitable brick-and-mortar stores. Target didn't jettison MF because they were losing money on the chain; they sold it because they weren't making money as fast as they wanted.

So, yes, if they were to purchase every outstanding share of Amazon stock, yes, it would cost them $21 billion. When was the last time one company bought another company by purchasing every outstanding share, though? I think a wad of cash and taking on outstanding debt would make quite an attractive buyout package, especially if it included stock in the resulting company.

Take Amazon's brand and knack for staying alive on the Web, cut it with Target's business sense and bleeding-edge-of-hip sensibilities (well, in their minds, anyway), and you might have a company that works. It wouldn't surprise me in the least if it happened; if Target figured out how they could make Amazon into a cash-cow. It's not like they don't have experience managing a mail-order company.

Making Amazon consistently profitable, though - aye, there's the rub.

Re:Anyone wanna bet

[Humba]

Regarding the 1999 Christmas, actually, the goods were in the warehouse, and the web site was on wobbly legs, but usually held up. However, the fulfillment arm couldn't pick, pack and ship fast enough to keep up with the incoming orders.

I had a few friends that took good paying temp jobs picking and packing toys for them, and then (remember, 1999) put "eCommerce experience" on their resume.

--H

Re:Well, actually...

[IronMagnus]

Ya, the article pretty much said all that...

Re:What is this?

[chaffed]

When it involves toys? Yes very much so.

Think geek has a great selection but when I need the latest barbi... Xbox game I want toys R us to be there.

Exclusivity Deals

[victor_the_cleaner]

Exclusivity deals are such a joke. I remember in the boom days sites like Excite would work all kinds of exclusive deals, always bending the rules a little bit.

Excite Dealmakers:

"E-Trade: You are our exclusive provider of finanical information, we'll brand the finance section with E-Trade logos, you'll provide content, blah blah"

"Ameritrade: You are our exclusive provider of 'personal' financial information (sorry E-Trade but 'personal finance' is different that 'finance'). we'll brand the section with Ameritrade logos, you'll provide content, blah blah"

Excite must have been using their Bill Clinton dictionary, "It depends on what your definition of exclusive is"

Re:Exclusivity Deals

[spacerodent]

yep i really hate it when web sites have "exclusive" content or demos and then get hammered into slashdot land

Not sure who to root for

[mgkimsal2]

I'm not a big Amazon fan, but it seems that if they had an agreement to allow Toysrus to sell certain items exclusively, then violate that agreement, they're in the wrong.

If Amazon's charges are true, then ToysRUs.com can't seem to operate ANYTHING. Back in 99/2000 (or 2000/2001?) they failed miserably at xmas two years consecutively. Both times relying on rather crappy ColdFusion (I had a friend with inside contacts to the web dev team at that time, and they just did not know how to scale a site - relying on CF wasn't a big help either).

So, they get rid of their net headaches, and can focus just on the business of management and fulfillment, and couldn't seem to do that right either (again, if Amaazon's charges are true).

Who do you root for here?

Re:Not sure who to root for

[agbert]

I was burned in xmas 99 by TRU, and was happy they moved under the Amazon hood. Recently I was burned again ordering toys from Amazon for an out of season birthday. I've always been happy with Amazon's up front way of doing busines and am impressed with their ability to bring some brick and morter to the net. I'm not suprised by Amazon's argument, but I am suprised that Amazon didn't bring suit for breach before TRU re exclusivity.

-Andrew...

Re:Not sure who to root for

[waswaldo]

'crappy ColdFusion'? Oh my god, whoever feed you that line was blowing hot air. Please name a technology available in early 1998 that could scale to 10,000 concurrent users which a team of four people could implement in four months. Right, there wasn't any! While CF had a lot of issues, it was *not* the cause of the Amazon deal. It was solely due to warehousing issues.

You may have 'a friend with inside contacts', but I was the Team Lead who wrote much of the TRU website. The CF code base was cutting edge; incorporating an in-memory cache for thousands of items on hundreds of servers. We reviewed and rejected TimesTen - ours was better. The shopping cart (Hi Chad!) was the *most* advanced in the world enabling many different types of discounts and bundles. Our Content Management system used Portal concepts (moving portlets around the page, columns to organize dynamic info) way before Portals were well understood.

My name is David Medinets, google away if you doubt me.

Re:Not sure who to root for

[Anonymous Coward]

Get over yourself.

BTW: putting mensa on a resume is pretty arrogant.

Re:Not sure who to root for

[frost22]

why then, if it was so great, did it fail so spectacularily ? why couldn't you code the line "sorry we are out of stock" ? why wouldn't you implement honest customer information ("we have a backlog of 12.000 and there's not a chance in hell you'll get Big Jim Ninja Turtle Robot before Christmas 2007"). ?

Warehousing issues ... pfft. You probably thought of the customer as "the one who's going to be ripped off". Oh, and how they were! Once.

Tomorrow’s Headline

[poofyhairguy82]

Brittney Spears marries newly divorced Amazon.com.

Sources say the wedding was a 4 and a half star event, See all 146 customer reviews.

Hollywood insiders criticize the move, saying that the couple is "SOOOO 90's."

Re:Tomorrow’s Headline

[Anonymous Coward]

About right now is when a LAME tag would be appropriate. Seriously, that wasn't funny.

Who gets custody?

[pyrrhonist]

Who gets custody of Kids 'R Us and Babies 'R Us?

Re:Who gets custody?

[Gogo Dodo]

Office Depot gets custody of Kids 'R Us stores. Toys 'R Us is shutting down the Kids 'R Us stores and selling the locations to Office Depot for $197 million. Office Depot is just buying the locations, not the actual store names, inventory, etc.

Re:What is this?

[maskedbishounen]

Geeks like toys too, you know!

*cough*

I thought it was gonna be...

[Anonymous Coward]

Amazon decided that Toys' "My First Camera" violated their patent on one-click technology.

Obligatory Family Guy quote:

[Anonymous Coward]

Yes, that's right Mr Giraffe. Get all the marmalade.

Amazon dug their own hole

[ObsessiveMathsFreak]

Amazon tied itself toone supplier of toys, and , surprise, surprise, that supplier didn't perform. Now that they want to end the agreemnet they find their in trouble, as Toys R Us is turning out to be benifiting from this rlationship to the detrement of Amazon.

This should be a lesson to all startups not to make a pact with the devil just to increase your profile.

Re:Amazon dug their own hole

[jokach]

But wouldn't you think that Toys R Us had a certain obligation to Amazon to perform? I mean, keeping popular items in stock and being innovative in its offerings to Amazon shouldn't have to be written into an agreement, should it?

I know personally that the selection at Toys R Us is lacking at holiday time (last 2 years), this 'divorce' doesn't surpise me in any way.

Re:Amazon dug their own hole

[Anonymous Coward]

I mean, keeping popular items in stock and being innovative in its offerings to Amazon shouldn't have to be written into an agreement, should it?

As far as the courts are concerned, it should. Do you think Toys R Us will be ordered to pay Amazon $750 million because "Well, Your Honor, it wasn't in the contract or anything, but in your personal opinion don't you just think they should have done this and that?" Sorry, that's not going to fly.

NOO!

[Anonymous Coward]

Would someone please think of the children?!

Exclusivity is only part of the issue

[Starrider]

Exclusive is just one part of the contract. If Toys-R-US is required to maintain stock and avoid out of stock percentages above a certain figure, they violated the contract first. The linked article states that Toys-R-Us kept out of stock levels at above 10% on many popular toys.

Since I haven't seen the contract, I don't know for sure, but this is what it is sounding like.

Re:Exclusivity is only part of the issue

[PleaseDontBeTaken]

That was during "peak periods" i.e., Christmas.

It's no secret that hot toys sell out at Xmas.

Toys'R'Us (bricks) maintained one of the highest in-stock percentages through the season. In contrast, Walmart was out of up to 25% of key items, iirc.

Sometimes you can't even choose to maintain higher inventories--suppliers have none to give.

I'd like to see the contract (if some has a link to it, pls post it). But I'm skeptical when someone countersues after breaking a contract and their basis is most simply "bad business judgment." Bad business judgment should not be adjudicated.

Re:Exclusivity is only part of the issue

[Starrider]

If the contract explicitly states "partner is in breach of contract when they reach out of stock levels above X%" (again, speculation) then it is not simply bad business decisions. If you promise to meet a quota and fail to deliver, you are in breach of contract.

Don't sign a contract for which you can't meet your obligations. It doesn't matter WHY you are failing to meet your obligations if you guarantee in a contract that says you are.

If I take money from you and I contractualy guarantee you I will always have Furbies, I better meet that promise.

Again, this depends on the language of the contract. As sympathetic as your argument may seem, it is irrelevent if Toys-R-Us didn't meet its obligations.

Re:Exclusivity is only part of the issue

[Kierthos]

Look, I could understand if I went to one TRU and they were out of the latest Shiny Toy(tm), because then, I could always try Wal-Mart or whatever. But it's not like Amazon was solely getting the toys from a single TRU location. Ostensibly, they had access to the goods at the warehouses or shipping centers or whatnot.

Now, does that or should that make it easier for Amazon to win? Beats me. It's just something to consider.

Kierthos

Re:Exclusivity is only part of the issue

[PleaseDontBeTaken]

Agreed. We're all guessing until (if ever) the contract is revealed.

That said, I doubt that a X% in stock is in the contract, since that can be out of Toys'R'Us's control.

Re:Exclusivity is only part of the issue

[PleaseDontBeTaken]

Good point. But some additional research shows it actually works differently. The inventory is actually held at Amazon!

Toysrus.com sells merchandise to the public via the Internet at www.toysrus.com, www.babiesrus.com, www.imaginarium.com, www.sportsrus.com, and www.personalizedbyrus.com. We opened our on-line doors to the public in 1998. In order to provide better customer service and order fulfillment, we entered into a strategic alliance with Amazon.com, Inc. and launched a co-branded toy store in 2000. Under the strategic alliance, this co-branded store offers toys and video games (Toysrus.com), baby products (Babiesrus.com), and learning and educational products (Imaginarium.com). The strategic alliance agreement, which expires in 2010, combines Toysrus.com's merchandising expertise and trusted brand name with Amazon.com, Inc.'s strengths in website operations, on-line customer service and reliable fulfillment. Toysrus.com is responsible for merchandising and content for the co-branded stores and identifies, purchases, owns, and manages the inventory. Amazon.com, Inc. handles site development, order fulfillment for most items, customer service, and the housing of Toysrus.com's inventory in Amazon.com, Inc.'s fulfillment centers in the United States. (from recent 10-K)

So TRU buys what it thinks it will sell, and then it's actually held at Amazon warehouses. Obviously Amazon would prefer that TRU buys gazillions of every unit, since TRU has to take all the inventory/pricing risk on unsold items, and Amazon only has to find a place to store it all. TRU is going to optimize margin vs. out-of-stock opportunity losses, just like a normal retail store. You could argue they have a slight incentive to have worse in-stock online so as to steer people to stores, but 1) it's pretty slight, and 2) that can be addressed (or not) by the contract.

Re:Well, actually...

[Pieroxy]

Toys R' Us sued first

I understand that you didn't read the article, everybody does that. But the story ?

From the story:
Responding to a Toys R Us lawsuit accusing Amazon...

Curses! This could be terrible!

[91degrees]

If Amazon wins, then it could mean that Amazon will have better supplies of their stocks, and that will be terrible because..

erm... I mean, if Toys R Us wins, then it could mean that Amazon will keep running out of stuff, and thre will be no option for the toy buying public but to go to one of the many other online retailers

No. Sorry... Why do I care?

The only one who profits from this...

[HarbV7.0]

The only one who profits from this is Law Suits are us. Just like a real divorce! Who gets the Barbie Cottage in the Hamptons? The only thing I got to keep in my divorce were the computers and the dreamcast...

Re:The only one who profits from this...

[geminidomino]

The only thing I got to keep in my divorce were the computers and the dreamcast...

Really, though... what more do you need? :)

Re:Well, actually...

[Anonymous Coward]

Suing here, suing there...

There are several ways of running capitalism. I'm not sure any way survives many centuries without major catastrophes, but the one used in the US will definately be the best help to bring down itself. Violently.

If you have a look at Japan for instance, another country with widely implemented capitalism, suing isn't often even an option, they solve things in decent ways.

I'm just laying back watching the US break down, even tho I might have to wait another decade or so. What, to some, looks like a glimmering flower, is by itself a great weapon of major distruction. It's just that it has no direction, and no speed, it falls right down on itself.

Thinker from nothern Europe

With toys like the Nimbus 2000...

[hadesan]

Wasn't (isn't) there still a run on this toy... Read the reviews... At Amazon's Toyrus section - the Nimbus Broom

Re:With toys like the Nimbus 2000...

[hadesan]

Links to the old reviews captured at mlcsmith and another set of old reviews and finally a trial test at the toy factory

Re:What is this?

[Anonymous Coward]

Yes. As a transfan I go to TRU a lot and collect transformers. I'm sad to see them failing; they have a lot of good exclusive toys like scourge and all those generation 1 reissues.

Re:Well, actually...

[rasafras]

Responding to a Toys R Us lawsuit accusing Amazon of breaching exclusivity provisions of its $50M-a- year tenancy agreement, Amazon has countersued the giant toy retailer

Yes, Toys 'R' Us did sue first. Didn't you read the story?

"I Don't Want to Pay Up...

[jeephistorian]

I don't want to pay up
I'm a ToysRus Kid....

Fritz

This reminds me....

[machocomacho]

This reminds me of the scary time in 1972 when Barbie filed for Divorce from Ken. Good thing they got it to work out.

Toys-R-Us

[Daimaou]

I can understand Amazon's complaint. Every time I have set foot in a Toys-R-Us retail store to buy something for one of my kids, I have left empty-handed because they didn't have what I was looking for in stock. Of course, if you wanted a Polly Potty with life-like urine, then you were in luck.

I guess that's just how they choose to do business.

Re:Toys-R-Us

[Anonymous Coward]

Hear hear. It's even worse if you're looking for TransFormers. "ToysRUs Exclusive" seems to be synoymous with "you'll never see it." It's a shame that KayBee and everyone else are usually even WORSE :(

750m?

[firstadopter.com]

let's see, i dont' like how the contract is going, so pay me 750m for me to break it... uh.. excuse me?

Re:What is this?

[Babbster]

Not only do we like toys, but we like videogames (possibly could be considered toy but really another category). My company gave me a $50 Amazon gift certificate, and I picked up a couple GBA games through the Amazon/Toys'R'Us connection.

Of course, since that's the only time I've ordered from Amazon, I don't really have a dog in this hunt. I will therefore root for chaos!

Dot-Com Divorce is *so* y2k

[Jonathan Quince]

It looks like we're back to the era of Internet company shenanigans.

Re:Well, actually...

[Pieroxy]

You are either:
a. On the edge of being funny
or:
b. Stupid

Please let me know.

WTF?

[acidrain69]

When did /. turn into business knews? Why do we care about this?

Re:WTF?

[Anonymous Coward]

Because SCO's stock might get a bounce on Monday from the idea that "exclusivity" can be added to the list of concepts that former business partners can be sued over.

Re:WTF?

[DAldredge]

Perhaps you should remove the union link from your sig, I do not think they neeed the support of someone that do not know the difference between news and knews.

Re:WTF?

[acidrain69]

It was a typo thank you. I tried to stop the page load, but I was too late. I did notice it, and I know the difference. It was a case of the hands wanting to type one thing, and the brain wanting another.

Re:WTF?

[DAldredge]

Then you should have pointed it out in a message attached to the first.

Wow

[poofyhairguy82]

No wonder this person used AC. This is the worst mod on a first post I have ever seen.

Actually...yes it should

[CdnZero]

...shouldn't have to be written into an agreement, should it?

I would say that it should indeed. Things run out of stock and not every product offered will fly off of the shelf. Therefore, to disolve the contract there needs to be meaningful criteria set out in the contract to do this. Cummon, its not like we are talking about Garage Toys Inc and Joe Webshingle Co! These are huge companies with lots o cash tied up in this agreement. Amazon can't just arbitrarily say "I don't like the job you are doing, bye bye".

I would expect that this kind of information is in the contract somewhere though. Then it becomes a case of proving Toys R Us has failed to live up to its obligations set out re: stocking levels and product sales.

Re:Actually...yes it should

[H09N0X10U5]

I would expect that this kind of information is in the contract somewhere though.
I wish I was a top corporate lawyer like you, specialising in the fucking obvious.

Call social services

[Anonymous Coward]

We got to make sure the bean babies don't walk out of this divorce without proper child support, Jeff Bezos has the money so let's suck it all.

We would also need an attorney for the barbie estates, lego mechanix patents.

And what about Geoffry is he gonna get something too?

Who will own the customer data?

[Anonymous Coward]

Who will own the customer data after the divorce?

Could be ugly.

Hmmm...

[MikeD227]

cool.

The truth continues...

[Crash Culligan]

It seemed to be true in the 80s, it was proven true in the 90s, and it doesn't show any sign at all of slowing down. Companies don't like teaming up with other companies, they like preying on other companies' customers.

Think of the corporate landscape as an enormous singles bar, with an all-night wedding chapel on one side and an all-night divorce lawyer on the other. Companies frequently get together, pop on over to the wedding chapel to start a harmonious relationship, then after they've tried making it work for a while they pop on over to the divorce lawyer because they had no idea what a gold-digging tramp/slut/cheapskate/moron the other one was. Then they go back into the singles bar to cruise for another sugar-incorporated.

Lather, rinse, repeat. Now, if only on the honeymoon they didn't screw their customers...

Idea

[PsiPsiStar]

Just a thought- sometimes lawsuits aren't done to collect money. This is retaliatory, I assume. Possibly, Amazon wants Toys R Us stock to fall. Such a fall delays investor profit taking, if only temporarily. Not sure how it affects a company's credit, ability to leverage it's transactions, etc. An insanly large (as in this case) lawsuit can be used to do damage even if it falls through later. If stock price falls enough, management might be replaced.

Re:Well, actually...

[IronMagnus]

Redundnt my ass, I was the first to post that what this person had said was in itself redundant, who the hell is moderating this stuff?

Good Riddence to Toys R Us

[Anonymous Coward]

Toys R Us has put all the local toy stores out of business, they keep prices high. They are a picture example of an abusive monopoly.

Take imaginarium. THey were an up and coming chain that had a clever arrangement of toys that was slightly upscale and presented the consumer with a good arrangment of birthday party toys, that is, a lot of clever stuff under $50.

Well, Toys R Us saw this chain as a threat, so they bought them.

ANd then they shut them down. No good reason for it, but they killed a competitor.

I look forward to their folding.

Here's a hint

[Anonymous Coward]

Hardly *anybody* knows how to scale a site.

You'll laugh. Tell me I'm an idiot.

I've been the architect of one of the largest travel sites on the web for 8 years (which is forever in this business). And we've gone from selling 50 packages a day to routinely selling 12,000 a day with close to 300,000 unique visitors. We'll have 1/2 Billion in revenue this years.

We don't do our own development; we outsource it, to vendors that are experts in certain fields.

As it turns out, there are only a handful of application vendors in the world who know how to scale a site much beyond 1/10th of what we do. We have to train our vendors. We work with network vendors, DB vendors, everybody to help them "upgrade" their products so they can play in the big leagues.

Cold Fusion is a toy. All of these "packages" are a toy. The sites like Amazon, Ebay, all the big boys (and we're nowhere near their size) are proprietary stuff through and through. And even when they use stock stuff, its arranged in such a way that its unique to that business.

My point is that I can show you 10,000 consultants who will tell you with a straight face they can build a web site to handle these high levels of traffic. None of them have a clue.

My guess is the management of Toys R Us in '99 either hired one of these clueless consultants to do their web site originally, or the in-house staff said "Hey, we already did an intranet, we'll use cold fusion on a couple of NT servers, MS says that will work fine".

If Toys R Us loses their exclusive branding with Amazon, not only will they be missing a huge channel, but they've never internally developed the skills to understand how to build a big site.

This is going to be a nasty fight if only because Toys R Us can't afford to lose Amazon right now.

Re:Well, actually...

[Patrick13]

Having taken the radical step of RTFA (actually both of them) - It seem that Toys R US's issue is that they were paying a premium to be the exclusive supplier of certain products:

"...Toys'R'Us was happy to compete with other vendors, but that "we are not willing to pay for exclusivity we are not receiving"."

Amazon's response is that they had no choice but to violate their exclusivity agreement because of their partner's supposed inability to keep the items in stock, (and it is implied that their buyers were incompetent).

Amazon's point is justifiable, but probably not defensible legally, unless there is some clause that says that Toys R Us could never have less than X% of their inventory out of stock - which is probably why they mentioned the 10% figure.

caption should read...

[r-dass]

geoffrey vs. jeffrey :)

Smell that? Smells like shyster.

[blair1q]

Amazon is the SCO of retail.

Amazon is the Wal-Mart of the future.

Alternat Time IBM Writes it's own Dang OS

[Anonymous Coward]

How would thing be different today if IBM wasn't so damn lazzy and had written it's own software. Would we just have I different slave master for our PC's or would we have higher quality OS's? Windows: Unstable at Any GHz --- obscure Ralph Nader refernce.

Metamod: Mod Moderator Troll

[Anonymous Coward]

Another example of dumbass moderators. This was the first posting bringing up that argument, so it can't be redundant, even if its from an AC. Metamod the moderator accordingly, thank you.

Re:Metamod: Mod Moderator Troll

[Anonymous Coward]

This was the first posting bringing up that argument, so it can't be redundant

It can if it merely parrots from the article.

even if its from an AC

-1 ad hominem.

Re:Metamod: Mod Moderator Troll

[Anonymous Coward]

Metamodded neither fair nor unfair.

Objection. Irrelevant.

[Sycraft-fu]

Your personal experience is not relivant to the overall situation. Personal anecdotes are not relivant to the overall situation and you ought to know that. That you percieve Toys R Us shutting down is not relivant to their national status.

Re:Objection. Irrelevant.

[Bob Uhl]

Personal anecdotes are relevant; they are merely hearsay, however. FWIW, I am not aware of a Toys R Us in driving distance of my home, FWIW.

Re:What is this?

[Anonymous Coward]

Is this something that is importnat or nerds? Is it something that matters?

Look who posted it. Is he a twat?

Monopoly

[Anonymous Coward]

Like many large retailers, Toys R Us put as lot of people out of business and now has a virtual monopoly in the retail toy space. The partnership with Amazon was a clear attempt to do the same thing online. It's hard to have a monpoly online and push bad toys and high prices.

You know, I used to think the same thing.

[DivideByZero]

I came to an amicable agreement with my (now) ex-wife, we drew up an outline of how we wanted to settle things, then I went to the library.

Then, after reading three seperate books on the subject, and getting three contradicting answers as to what needed to be done (with filing fees attached to each attempt.), I just went to a lawyer and paid a fairly reasonable sum to get it taken care of.

I guess if I wanted to sink a week's worth of effort into a DIY attempt, and maybe waste more money than the lawyer would have cost in lost wages, it would have been possible.