Toys “R” Us Suit Ends E-Commerce Honeymoon

The honeymoon is over for e-commerce companies. A class action lawsuit filed in Washington state yesterday alleges that Toysrus.com spoiled Christmas for an untold number of children by failing to deliver goods in time for the holiday.

The suit claims that the e-tail branch of the brick-and-mortar toy giant deceptively accepted orders for Christmas presents that it knew it could not deliver.

Breach of Contract Claim

Attorney Steve Berman, who is known nationally as an expert in class action litigation, is claiming that Toysrus.com breached its contract with thousands of customers and used deceptive practices to lure shoppers into shopping with Toysrus.com.

The class, if approved, would include all Toysrus.com customers who purchased toys on its Web site by December 14, 1999 — the designated cutoff date for guaranteed Christmas delivery — but did not receive their purchases by December 25, 1999.

Did Toys “R” Us Really Spoil Christmas?

Kimberly Alguard of Lynnwood, Washington claims that she ordered Christmas gifts for her four year-old son through the Toysrus.com Web site by December 7th, and requested a three to six-day delivery. Alguard said, however, that she knew there was a problem after she did not receive an e-mail confirmation of her order, or the order itself, after several days.

“I was told repeatedly by representatives that my order would be received by December 22,” Alguard said. “But it wasn’t until 9:30 p.m. on December 22 [that] I found out my order was not going to arrive by Christmas.”

Scrambling To Find Substitutes

Alguard said she was then forced to spend the next 48 hours scrambling to replace the gifts she had ordered for her son’s Christmas, hopping among Toys “R” Us stores throughout the Puget Sound region.

“This was the first Christmas where my son could really grasp what it’s all about,” she said. “For me, Christmas is about the kids, and it wrecked my Christmas that I was out until 1:30 a.m. [on] December 23rd just to get some of the gifts Toysrus.com promised would be delivered.”

According to the lawsuit, Toysrus.com heavily promoted its Internet site during the Christmas shopping season, inviting shoppers to avoid the problems of Christmas shopping by using the Toysrus.com site. The suit alleges that between November 22, 1999 and December 12, 1999, Toysrus.com attracted 1.75 million visitors weekly.

The site guaranteed Christmas delivery by standard shipping for toys ordered by December 11, 1999, and premium shipping for toys ordered by December 14, 1999.

The suit also alleges that Toysrus.com president John Barbour announced that the company would not be able to deliver promised gifts on December 22nd, well after the company had already secured customers’ holiday dollars.

What About the $100 Certificates?

Barbour’s announcement did include an offer of $100 (US$) certificates that were redeemable at Toys “R” Us stores for those whose orders would not be delivered on time.

Berman is claiming that this offer did not allow his client enough time to buy her child substitute toys.

What To Make of It?

There are going to be a polarizing set of opinions about the suit. In one camp, people will view the suit as little more than a greedy move by lawyers to extract settlement fees.

In the opposite camp, people are genuinely offended that a company like Toys “R” Us could provide such shoddy customer service. These people believe that Toys “R” Us is getting what it deserves.

E-Commerce Comes of Age

Regardless of what you think personally, the suit against Toys “R” Us is a sign that e-commerce has come of age and is now subject to the same forces that govern brick-and-mortar corporate behavior.

In today’s world, public companies that make big mistakes have to live with the consequences of class action lawsuits, regardless of whether we like the lawyers who file them or not.

What Do I Think?

While I understand that thousands of people are really offended by how Toys “R” Us handled its e-commerce operations during the holiday season, I still think the judge should throw this one out.

Toys “R” Us did offer a $100 gift certificate to compensate people for their problems. The people I know who had problems with delivery think that the resolution was quite fair.

More than that, these class action lawsuits often are not about justice. They are about settling, so that lawyers generate huge fees and the average consumer gets very little.

In this case, for example, it would not be a bad bet that the consumer who really was inconvenienced by Toys “R” Us ends up getting the equivalent of the $100 gift certificate that the company offered in the first place, while Steve Berman’s law firm makes $2.5 million or so.

Not a bad Christmas for Berman. But will the consumer really benefit? And what wrong was corrected?

What do you think? Let’s talk about it.

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