eToys built an infrastructure they only needed 3 weeks a year; went bankrupt 2 years after their 1999 IPO.
eToys couldn’t get the economics to work. On the day the toy seller went public in May 1999, it reached a valuation of $7.7 billion, 35% greater than Toys “R” Us. That was all the more remarkable given that in its most recent fiscal year, eToys had revenue of $34.5 million and lost $73.1 million. The company vastly overestimated its potential share of the market, losing out to more established competitors like Walmart and, you guessed it, Toys “R” Us. Meanwhile, its infrastructure costs soared. EToys filed for bankruptcy and shut down in March 2001.
