Mattel/22"/dt1st/mark2nd

By SARA FISHER

Staff Reporter

Every parent can tick off the names of the hottest toys around Furby, Tickle-Me-Elmo, the Cabbage Patch Kid but how many can name the company that made them?

As Mattel Inc. tries to become a major player in Internet commerce, therein lies its fundamental challenge: Training consumers to instinctively think of the manufacturer's brand name (and thus its Web address) rather than that of the toy. Then it has to condition consumers to head straight to the source, rather than a general retailer either online or in the brick-and-mortar world.

Good luck, say analysts.

"As it stands now, there is no chance that parents will go to Mattel.com to shop," said Ken Cassar, a digital commerce analyst for Jupiter Communications. "In the toy industry, consumers know the names of retailers, not manufacturers. I have a hard time believing that manufacturers will be able to successfully retrain consumers for this industry."

Few details about Mattel's Internet venture have been made public, other than the fact that the El Segundo-based company will spend $50 million this year to substantially expand its Internet presence. Mattel expects the site, which will sell all of the company's products as well as provide online activities for kids, will ring up $60 million in sales in its first year (still a fraction of Mattel's $4.8 billion in '98 sales).

Spokesman Glenn Bozarth said a major advertising push is planned for the fourth quarter of this year that will prominently feature the company's Web address.

Also, Mattel already owns and runs such Web addresses as "barbie.com" and "hotwheels.com." Parents who only know the name of the specific toy could reach Mattel via that route, and be linked to the main site from there.

"Some of the infrastructure already is there," Bozarth said. "Now it is a matter of bringing everything together into one site."

But Mattel has to overcome significant competition from already existing online retailers whose sites feature not only Mattel toys, but a variety of products from many different manufacturers.

The first company to enter a particular niche in cyberspace generally has ruled the roost. Toys are no exception. The hugely successful Santa Monica-based eToys Inc., which was the first general toy retailer to hit the 'Net, has handily outsold retailer Toys-R-Us' online division.

The online toy industry is still young, but Mattel looks like a Johnny-come-lately.

"Frankly, Mattel is just following in everyone else's footsteps," said Seema Williams, an Internet analyst for Forrester Research Inc.

But Mattel officials disagree that they are newcomers, pointing out that they have been involved with the Web for two years a relatively long time when it comes to the Internet.

Mattel first created Web pages targeting adult collectors of Barbies and Hot Wheels in 1997. The company expanded its site in 1998, creating a centralized site with more product-specific pages, and featuring limited e-commerce functions. Mattel is also in the process of acquiring Learning Co., the leading maker of educational software, and Purple Moon, an Internet company that runs a popular site geared toward preteen girls.

"We're not going to take anyone on, so to speak," Bozarth said. "With all the intellectual property we own, we can bring everyone in. We have worked with eToys from the beginning, and will continue to sell through them."

Bozarth would not elaborate on how Mattel plans to work with eToys, nor would he say whether the company intends to offer its toys at a discounted rate on its own site to undercut retailers.

Etoys executives could not comment because they are in a quiet period pending the company's initial public offering.

So how can Mattel sustain good relations with its retailers while simultaneously becoming their competitors?

"There is not a lot of love lost between the manufacturers and retailers already," Williams said. "In the end, it's likely that Mattel will see its retailers retaliating against them in some capacity."

No retailer would completely boycott such mainstays as Barbie. A more probable scenario is that a store would stop giving Mattel products preferential treatment. Because Mattel toys tend to be hot-selling items, the company often enjoys extra shelf space, up-front store displays and entire aisles dedicated to its products.

Toys-R-Us and FAO Schwartz executives did not return phone calls.

"Mattel has traditionally had a safe, peaceful coexistence with retailers, but it looks like they've chosen a less safe path," Cassar said. "As a result, Mattel could feel their displeasure."

In the end, Mattel still has the extraordinary strength of its toys on which to rely. In part due to its steady stream of acquisitions, it now owns the American Girl line of dolls and interactive software, and popular software titles such as Carmen Sandiego and Myst not to mention mainstays like Hot Wheels and Barbie.

"The Internet is part of kids' daily world now, and we have the intellectual property not only to make us a strong e-commerce site, but also an education, reference and entertainment site," Bozarth said. "We believe that we will create an Internet presence with broad family appeal."

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