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Amazon.ca launched a toys and games e-commerce site on Thursday.

AMAZON.COM/NYT

Playtime is getting rougher for retailers.

Amazon.ca launched a toys and games e-commerce site on Thursday, just as key rivals expand their toy businesses amid signs of softening sales in the North American segment.

The shift to selling toys online is putting pressure on all players to sharpen their games, following consumers' burgeoning embrace of Internet shopping. Discount giant Wal-Mart Canada Corp. raced to introduce online selling almost two years ago while category killer Toys "R" Us Canada remains an e-commerce stalwart, challenging a growing array of newcomers and now heavyweight online purveyor Amazon.ca.

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"Amazon is a big competitor," said Liz MacDonald, vice-president of marketing and store planning at Toys "R" Us Canada. "Their entry into the market is something we have to take very seriously."

Despite weakening toy sales over all as children turn to digital alternatives at an earlier age, the Internet toy business has emerged as a silver lining for retailers.

Overall Canadian e-commerce sales are expected to pick up by 14.2 per cent to $24.25-billion this year, almost the same as last year's 14.3-per-cent gain and up from a 12-per-cent rise in 2011, according to researcher eMarketer.

While annual sales growth is expected to dip a little in each of the coming years, it will remain in the double digits and far outpace the single-digit sales increases anticipated at bricks-and-mortar stores, said eMarketer vice-president Clark Fredricksen in New York.

"E-commerce broadly gives consumers an enormous amount of flexibility in product selection as well as a diversity of goods that simply can't be found at a single bricks and mortar seller," he said.

In the toy segment particularly, with so many niche products such as toy train parts, "it's a good example of where online sales can trump bricks and mortar sales," Mr. Fredricksen said. "The breadth of products available online gives that category an edge."

Amazon.ca, which has rapidly branched out beyond its books roots into an array of categories, launched a cyber toy store that carries 300,000 toys of all kinds, including brands such as LEGO, Hasbro, LeapFrog and Mattel.

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"You will continue to see us grow our selection and assortment of brands," said Andrea Leigh, toys and games business leader at Amazon.ca.

Still, the market is getting more crowded. Indigo Books & Music Inc. has put a big push on selling toys and games to help make up for its declining book sales, while Mastermind Toys is ramping up an ambitious cross-country expansion beyond its Toronto base. Both run established e-commerce sites.

U.S. discounter titans such as Wal-Mart Stores Inc., Costco Wholesale Corp. and eBay Inc. look to toys as an important category, while Target Corp. is just starting to gear up in this country.

"We have had a year of exceptional growth and customers continue to engage us in record numbers online," said Simon Rodrigue, general manager of Wal-Mart's e-commerce division. "Toys have been a strong category for us, and we know that with our selection and free shipping we will continue to see great growth."

Even so, retailers struggle to make sales gains in the toy aisles, and Sears Canada Inc. largely dropped them at its stores although it continues to stock them on its e-commerce site.

Last year, sales in the estimated $20.5-billion (U.S.) American toy sector fell 4 per cent, according to data from market researcher NPD Group, although it warned last month that it is updating its figures (it did not reply to emails.) Analysts have said the trends are similar in Canada.

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At Toys "R" Us Canada, online sales are growing at a faster clip than those in its physical stores, said Ms. MacDonald. The retailer features an endless aisle of goods online, stocking about 20 per cent more toy offerings than in its bricks-and-mortar outlets, she said. At the same time, she isn't underestimating her latest cyber-rival. "When Amazon gets into it, it's just going to force us to be a better retailer."

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