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Rising From the EToys Ashes

EToys.com is out to prove websites that burned through massive sums of cash raised at the height of the Internet stock boom don’t have to die a horrible death.

Instead, they can simply declare bankruptcy, dump leftover inventory at bargain prices, sell their domains to a competitor … and try to do it all again.

As the holiday buying season approaches, one of eToys’ former competitors, KB Holdings, is reviving the ill-fated online toy store into what it hopes will become a profitable venture.

Last week, the holding firm, which operated the KB Toys chain of retail stores, quietly re-opened the eToys website. The site had been shuttered in March, after eToys filed for bankruptcy.

The re-launched site, at first glance, looks much like the old site. KB, however, says there will be some significant differences in how the operation is run.

“We won’t be spending tens of millions of dollars on TV advertising like they did,” said spokesman John Reilly.

The re-opening of the site comes six months after KB purchased eToys’ leftover inventory in a bankruptcy sale. KB, which also runs the retail site KBtoys.com, later purchased the eToys domain name and associated intellectual property for a reported $3.4 million.

But although KB did purchase eToys’ assets, Reilly said, it does not plan to take on the fast-spending ways of its predecessor. Instead, the plan is to capitalize on the costly promotional activity that eToys already performed.

Before it went under, the company established itself as something of a household name. And while it may have plenty of disgruntled ex-investors, the company did manage to maintain a pretty good reputation with customers.

In the brand-obsessed online retail business, KB isn’t the only company relying on a famous, but-now-defunct, dot-com name to spur sales.

In recent weeks, a company called WhyRunOut.com has been sending out e-mails to ex-Webvan customers, promoting itself as a successor to the now-defunct grocery delivery service.

Although the service differs a bit from Webvan, levying charges for deliveries and filling orders from local stores instead of warehouses, WhyRunOut is banking that customers who grew accustomed to home deliveries will be looking for someone to fill the void.

The practice of scooping up domains of famous (or infamous) failed retailers dates back to some of the first dot-com flameouts. Last year, online shopping site Fashionmall.com bought the assets of British boutique site Boo.com and later re-launched it as “the new Boo.”

It also didn’t take long for pet-supplies chain Petsmart to buy the Pets.com domain, after the original bankrupted itself with the aid of a costly sock puppet advertising campaign. People who go to the Pets.com site are automatically directed to Petsmart’s online store.

In most cases, it’s the opportunity for bargain prices that prompt companies to buy up assets of a bankrupt competitor, said Paul Ritter, program manager for e-commerce strategy at Yankee Group. KB and eToys appear to be no exception.

“KB Holdings picked up millions of dollars of eToys inventory for cents on the dollar, giving them a huge pricing advantage,” Ritter said.

The potential for price cuts is especially important for KB online, he said, as the company faces formidable competition from the popular toy-selling site run by Amazon.com and Toys R Us.

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