Amazon.com and Toysrus.com - two of the big names of Internet-based retailing - have announced that they're teaming up to launch a new cobranded, online toy and video game store, as well as another Web site that will sell baby products.
According to the two companies, the toy and video game store is scheduled to be launched in the third quarter, with the baby products store due to follow in the first half of next year. Online shoppers who visit Toysrus.com, its Babiesrus.com affiliate or the toys section of Amazon's Web site will be redirected to the new cobranded sites, officials said last week.
Under a 10-year agreement between the two companies, Toysrus.com - with help from Toys R Us - will identify, buy and manage the product inventories to be sold through the two new sites. Amazon will be responsible for Web site development, order fulfilment and customer service.
Amazon will be compensated through a combination of periodic fixed payments, per-unit payments and a single-digit percentage of revenue, the companies said. In addition, Amazon will receive warrants that enable it to buy an ownership position of up to 5 per cent in Toysrus.com.
"This is a huge win for our customers," Jeff Bezos, Amazon founder and CEO, said. While the company's current toys and games business "has grown rapidly", the alliance with Toysrus.com will bring Amazon customers a greater selection of products, he said.
But both Amazon and Toysrus.com have had problems in recent months. For example, Toysrus.com was one of seven online retailers fined last month by the US Federal Trade Commission for making late deliveries to online customers during the 1999 holiday shopping season.
And Amazon has been hit in the past few weeks by an $US89 million second-quarter loss, the resignation of its president and chief operating officer, the need to restructure financial deals with other unprofitable online retailers in which it has invested and a pricing glitch that led some toys to be priced incorrectly on its Web site.
Alan Alper, an analyst at Gomez Advisors, said Amazon overstocked toys last year, but then took it on the chin when it was left with a huge inventory after the holiday season.
See also CW August 14, p40 and July 31, p4.