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. Last Updated: 07/27/2016

Disney's Lagging Shuts Down

LOS ANGELES --, a privately held Internet merchant controlled by the Walt Disney Co., shuttered its virtual doors Monday, becoming a casualty of the web retailing shakeout and underscoring Disney's online travails.

The two-year-old seller of educational toys was experiencing a steep drop-off in the number of online visitors as big traditional retailers such as Toys R Us and Wal-Mart pushed their way into a competitive field occupied by startups such as and

ToySmart, which for months ranked last among the major online toy sellers, fired 170 employees after ceasing sales Friday. On Monday, the company's web site announced that the company was "closed this weekend for inventory.''

Some analysts suggested that Disney might try to sell the company's assets, or relaunch it as a business-to-business web site. Closing the operation is another online black eye for Disney.

The media and entertainment giant said earlier this year that it would retool its limping Network, which cost $500 million to build. That effort, itself a revamped version of Disney's Buena Vista Internet Group and Disney's Infoseek acquisition, will be refocused as a news and entertainment site after failing to draw visitors away from all-purpose web portals Yahoo Inc. and America Online Inc.

Disney acquired 60 percent of ToySmart last summer for an estimated $40 million to $50 million, as part of its strategy to buy its way into the newest entertainment medium.

David Cooperstein, director of online retailing for Forrester Research, said ToySmart was laboring under two major problems. An investment partner such as Disney, unlike many venture capitalists, had little patience for continuing losses. And ToySmart faced a better-developed rival in, which also targeted the educational toy market.