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FAO.com’s X-mas bonus
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December 23, 1999: 12:30 p.m. ET
With holiday sales up threefold, online toy shop finds new budget under its tree
By Staff Writer Tom Johnson
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NEW YORK (CNNfn) - While their counterparts downstairs were busy wringing a few thousand more sales out of what remained of the holiday shopping season, the folks at FAO.com were pondering a very different season altogether -- Summer.
Although three shopping days remained until Christmas, by Tuesday the online shopping season essentially had drawn to a close, a victim of inflexible shipping deadlines.
And while the final numbers would not emerge for another week or more, the initial returns breathed new life into what has been one of the toy industry’s smallest Internet operations.
After increasing its online sales by 800 percent during the 1998 holiday season, FAO.com again had surpassed the company’s wildest expectations, more than tripling revenue during the 1999 season.
To put it more bluntly, FAO.com was essentially the company’s third-largest retail outlet during the holiday season, leading to what cartoon character Dilbert might jokingly refer to as a "paradigm shift” in how the company’s management plans to approach the Web site in the future.
"It’s a whole different conversation than it was two years ago,” said Bill Miller, FAO’s executive vice president in charge of its Internet operations. "Now it’s being treated like it’s a bricks-and-mortar store.”
Turning its sights to the Web
Such a concept hardly seemed fathomable just three months earlier when FAO, having just hired someone to run the site in August, was only beginning to ponder a redesign of its corporate Web site in time for Christmas, as well as a handful of other ambitious projects.
Click here for an in-depth look behind FAO.com’s holiday efforts
Working with a limited budget and bare minimum staff -- two people oversee the Web site’s day-to-day operation -- FAO.com was forced to rely heavily on the company’s trademark name and reputation, as well as the reach of its technology partners, to drive holiday sales.
But even after the season got off to a bit of an ominous start, the end seemed more like one of the fairy tales whose many characters adorn the toy store’s shelves.
Last week, Miller and Jennifer Townsend, FAO’s director of new media, presented their results to the company’s top executives and opened more than a few eyes.
Although the New York-based company was one of the industry’s first to take its business online in 1995, company officials devoted few resources to it until just recently, letting the Web operation slip behind such rivals as Amazon.com and eToys in both innovation and prestige.
"FAO is a smaller company and it is not a public company, so we have grown the site more as you would in a traditional company,” Miller said. ”While we have value trying to make the customer experience easy and understandable, and trying to deliver the FAO message, some of our competitors with deeper pockets have been able to do things like free shipping.”
But that is all about to change. Encouraged by the holiday results, the company’s inner circle of top managers -- including Chairman and CEO John Eyler and President Bud Johnson -- authorized a "substantial” increase in the Internet operation’s budget that could help close the company’s competitive gap with its much larger rivals.
"Now you are starting to see much more commitment being put into the site,” Miller said. "Two years ago, we had to prove ourselves. This year, everyone is on board.”
Stepping out of the shadows
That newfound commitment will include transforming FAO.com into a more independent site next year, boasting a beefed-up marketing budget, more staff and promotions designed exclusively for the Web.
Although company officials won’t admit it outright, the changes being discussed are designed to improve FAO.com’s competitive stance against the very industry giants the company tries hard to distance itself from in the offline world.
Company officials were stung when a respected online analyst, taking into account a number of factors used to advise consumers of the best places to shop online, rated the Web site dead last among Internet toy sites.
Accordingly, another re-launch of the Web site is tentatively planned for June. Early plans call for the addition of even more Splash animation designed to mimic the feeling of wonder experienced when a customer walks into one of FAO’s 40 retail stores nationwide.
Also on the drawing board are merchandising plans designed to move products solely through the Web site.
Currently, the hundreds of products sold via FAO.com mirror what’s available in one of the company’s retail stores or through its catalogs. Beginning next year, the company will attempt selling a handful of products -- mostly seasonal toys -- exclusively through the Web.
Company officials hope that will resonate with online shoppers, particularly given FAO is already known for the many "exclusive” toys it sells from around the world.
Other ideas include creating what amounts to an online personal-shopping service via so-called chat rooms -- an increasingly popular feature that already exists on several toy sites -- and upgrading the customer notification system to provide shoppers with a better idea of when their gifts actually will arrive.
But the biggest changes clearly will come in the amount of advertising exposure the Web site receives. Whereas FAO.com ran only three advertisements separate from the retail store during this holiday season, company officials plan to increase that number substantially next year.
"We are really looking at merchandising the Web site just like we do in the flagship stores,” Miller said. "We are essentially building another flagship store.”
Miller conceded that generating heightened awareness of the Web site ultimately might hurt its catalog business. But since FAO.com generated roughly 40,000 unique visitors a day during the holiday season -- a figure within striking distance of some big retailers like Wal-Mart -- it’s a concession company officials seem willing to make.
"We are reaching whole new customer bases,” Miller said. "We only have 40 bricks-and-mortar stores. Essentially we have one store in each major market. Now we can serve that customer from their home. It is actually adding a whole new level of service for our customer.” 
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FAO.com
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