January 31, 2000

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Case Study:
Rapid Growth Shapes IT Strategy At Toysmart.com

By Felix Gorrio

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all it the price of success. In 1999, Toysmart. com Inc. expanded its product line from 20,000 to 70,000 gadgets and games while it also moved into a new warehouse and adopted new back-office IT systems. "All the pieces of the architecture changed simultaneously," says Mark Reese, chief E-commerce officer at the online toy retailer.

Although Toysmart.com could have outsourced its entire IT operation to ease the administrative load during the relocation and expansion period, the in Waltham, Mass., company opted to implement and operate its own back-office functions, including inventory and fulfillment systems from Yantra Corp., a customer-care solution from Silknet Software Inc., and a financial system from Great Plains Software Inc. Previously, Toysmart.com had developed its own proprietary applications, which were integrated into a Microsoft E-commerce platform.

Despite good intentions, unbridled growth is driving most IT decisions at privately held Toysmart. com. By the end of last year, the company had grown to 200 employees, up from just 20 in February, and holiday sales were up 1,000% over the same time period the previous year--its first year in full operation. So while the company's long-term strategy is to keep IT administration in-house, the reality of a breakneck rate of growth means Toysmart.com will take all the help it can get.

The Web site is hosted by NaviSite Inc., giving the company more stability during a year of explosive growth and migration, Reese says. "Basically, they keep us up on their servers, and we do everything else. We knew we couldn't afford to drop the ball with the site itself," he says. "Whether we continue with that hosting solution or not is something we'll consider this year as part of our strategy," he adds.

Speed was also a major factor in selecting an inventory and fulfillment system. It took about 70 days from signing the lease on an empty 126,000-square-foot warehouse to going live, Reese says. "While we were doing that, we were completely outfitting the warehouse as well--all the material handling systems, the conveyors, and the RF scanner guns."

Ad hoc decision making comes with the dot-com territory, Reese says, and business growth and IT infrastructure work hand-in-hand. "The Internet is about nothing if not speed," he says. "Of all the key design elements we focus on, including scalability and reliability, the one that many people miss is flexibility. Having that creates a lot of agility in adding new product lines and finding better ways to do things."

As an example of that agility, Reese points to Toysmart.com's rapid move into the baby market in 1999. "We had to move from the idea of offering baby products to actual delivery in 60 days. That involves stocking a completely different product mix at the warehouse. Then, our Web staff had to build a store out of those 20,000 new products very, very quickly."

Despite its dependence on technology, Toysmart. com doesn't want to rely on IT for its entire back-office operation. The company can still process orders and ship goods manually, and additional workers can be added to handle higher volumes. During the peak holiday-shopping season, for example, Toysmart.com added 320 seasonal workers to its fulfillment center and merchandise warehouse team to keep business humming.

Return to main story, "Rapid-Fire IT Infrastructures."

Illustration by Bob Daly

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