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Amazon becoming Shopping Mall

September 25th, 2003 · No Comments

WSJ writes about the strategy shift at Amazon:

At Amazon.com Inc., a new strategy is taking root: The world’s biggest online retailer is trying to transform itself into a shopping mall.

This week, Amazon opened a sporting-goods department where retailers such as Golfsmith International Inc. can sell golf clubs, baseball bats and other athletic gear. Lands’ End and online luggage retailer eBags.com Inc. have already set up stores in the apparel section. And Amazon hopes to roll out a gourmet-food store and health-and-beauty shop in time for the holidays, according to people familiar with the matter.

Amazon processes the orders for these departments, but the retailers fill the orders from their own warehouses. Amazon gets a cut of the sales — and can expand into different businesses without making a big investment in inventory. The retailers receive access to Amazon’s most important assets: its customer traffic, $1 billion investment in technology and Internet know-how.

But becoming a shopping mall is creating new tensions in Amazon’s business. Even as Amazon successfully recruits retailers to sell on the site, some popular manufacturers are worried Amazon’s emphasis on discounts might cheapen their brands. Nike Inc. is trying to get retailers to remove its products from the site, and Callaway Golf Co. has asked retailers not to sell its new golf equipment there.

At the same time, Amazon has to worry about risking its own reputation by putting the delivery of products into the hands of outsiders. And as it expands its stable of partners, Amazon finds itself managing relationships with hundreds of retailers, most of them with their own demands about how their blue jeans, shoes and other goods are presented on the site. Gap Inc. and other retailers, for example, have clamored for bigger, sharper pictures of their products on the site or for special features such as monogramming.

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