Amazon.com In A Bazaar Move
Aiming to further its already dominant position in online retailing, Amazon.com is opening its virtual doors to outside businesses, mighty and small, that want to sell their wares on the Web.
The online retailer said it will begin allowing anyone to sell merchandise through its Web site via its so-called ZShops program.
Beginning Thursday, Amazon will sell more than 500,000 items, including vacation-travel packages.
Investors cheered the news, sending the stock of Amazon up as much as 15 percent Wednesday.
"This is what we've been waiting for," said Lauren Cooks Levitan, an Internet analyst at BancBoston Robertson Stephens. "Now (Amazon is going from being) the tenant to being the landlord. This is very positive, and it solidifies their already dominant position."
Under its ZShops offering, Amazon will charge $9.95 per month and take a transaction fee of 2 to 5 percent, depending on the prices of sold items.
"It's a place where you can buy and sell anything, with a capital 'A,' that you might want to find online," said Jeff Bezos, Amazon's founder and chief executive.
He said Amazon would provide no midquarter guidance to Wall Street on any possible effect on earnings. But Amazon did disclose that its number of members is now 12 million, up from 10.9 million at the end of the last quarter.
Amazon will also guarantee refunds on items up to $250, the company said at a New York news conference.
"Amazon has said all along that their goal was to provide people with access to every product that they could possibly want," said Ken Cassar, an analyst at Internet research firm Jupiter Communications. "This is getting them closer to that goal."
Sellers are required to stock the items they are offering and are responsible for shipping the products promptly. Amazon.com will process every transaction made at ZShops, which should reduce the risk of fraud. In addition, buyers can use Amazon.com's proprietary 1-Click payment feature, which stores shoppers' credit-card numbers and addresses so they don't have to re-enter them with each purchase.
Levitan added that while she may not raise her revenue estimates for the company, she reiterated her "strong buy" rating, citing the money-losing Seattle-based company's ability to raise margins and beef up its "bottom line - finally."
The challenge for Amazon is to maintain its image as it directs new customers to the other sites, Levitan said. Amazon's mechanism of guarantees and user feedback should help alleviate any problems, she added.
Things are looking up for the online retailer this holiday season. Warburg Dillon Read projects Amazon will rake in 25 percent of the estimated $12 billion in online sales this year.
Joe Galli, Amazon's president and chief operating officer, said ZShops gives the online seller "four times the number of items that a Target, oKmart or other mass merchant has."
"They're in a good position to compete with America Online and Yahoo," said Marc Rowen of Prudential Securities. "They're in the e-commerce sweet spot. Yahoo and AOL have bigger market caps, so there's room for upside (in Amazon's stock price) if they're successful."
Amazon will also provide a new search feature to help consumers shop for items on other Web sites.
By Bambi Francisco