Back at the height of the dotcom bubble, Amazon was signing lucrative deals with traditional retailers to be their online store. One of the biggest such deals was with Toys “R” Us. It was announced with much fanfare in 2000 and was supposed to last a decade. Toys “R” US would handle the toy buying and inventory management, Amazon would handle the Website.
It made sense until, oh, about 2004, when Toys “R” us filed a lawsuit for breach of contract. While Amazon was perfectly happy to be the exclusive online presence for Toys “R” Us, it didn’t feel that it had agreed to make Toys “R” Us the exclusive of provider of toys on Amazon. A New Jersey court ruled in favor of Toys “R” Us back in 2006. But only yesterday did Amazon finally settle with Toys “R” Us, agreeing to pay $51 million.
In an SEC filing Amazon states:
On June 11, 2009, Amazon.com entered into a settlement agreement in its lawsuit with Toys “R” Us, Inc., and its affiliates, with terms that include, among other things, (i) a one-time payment from Amazon.com of $51 million in the third quarter 2009, substantially all of which was unanticipated and will be charged to “Other operating expense” in the second quarter, (ii) dismissal of all claims and counterclaims, and (iii) mutual releases.
Nine years after the initial agreement, that particular dotcom hangover is finally over. It lasted almost as long as the original deal was supposed to be. The lesson here: don’t hand a key part of your business to someone else, especially if it is where your growth is going to be coming from. That is the same as handing control over your destiny to someone else.
(Photo credit: Flickr/Daniel Chan).