By all accounts, Christmas should be stellar for toy etailers. For
example, in the eToys quarterly report, the company’s revenues of $13.3
million beat many analysts’ forecasts.
Okay, it has its roots as a brick-and-mortar retailer, focusing on
children up to age six (there are 45 stores). Though, it is a massive
market of about $25 billion per year — and the market is growing. For
instance, there are four million babies born every year in the US. On
average, a household spends $4,000 per baby per year.
At the end of July, The Right Start launched its Web site and within 90
days, e-commerce revenues reached $1 million — without an advertising
budget. Instead, the company has been pursuing a “clicks-and-mortar”
strategy, such as by cross-promoting the site within its retail outlets
with signage, hanging banners, shopping bags, coupons and catalogs.
The company will not rely solely on cross promotion, but also extensive
advertising. Already, $6.5 million has been allocated for a marketing
campaign, such as for TV, radio, print and direct mail. The TV spots, for
example, will get national exposure for “Oprah” and “Martha Stewart
The Right Start has been in existence since 1985 and recognizes that new
parents demand high standards. They want quality products and strong
customer service. So, RightStart.com provides free shipping/handling,
same-day shipping, a 100 percent in-stock policy and return of merchandise to
The management team is strong. For instance, The Right Start recently
hired Scott Harvey, who was the senior vice president at Tickets.com (this
company is expected to go public this week, backed by Morgan Stanley).
RightStart.com is a division within The Right Start corporation and was
established by a private placement of $15 million from venture capitalists
Sierra Ventures and Palomar Ventures. In all, The Right Start owns
two-thirds of RightStart.com and could easily be spun-off as an IPO.
RightStart.com is currently generating $350,000 per week in revenues. Yet,
The Right Start has a market capitalization of a paltry $76 million. In
other words, compared to eToys, the markets are woefully undervaluing The
Right Start. But as The Right Start continues to execute on its business
model, this should change very rapidly.
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