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Amazon Creates Services Division

The business of selling other companies' goods is becoming a 'more integral part' of the Web retailer's operations.

June 11, 2003|Alex Pham | Times Staff Writer

Online retail giant Amazon.com Inc. said Tuesday that it has formed a subsidiary, Amazon Services Inc., to run online shops for other retailers.

Amazon, which sells items as diverse as CDs, power tools and digital cameras, already runs Web sites and processes online transactions for discount retailer Target Corp., bookseller Borders Group Inc. and toy merchant Toys R Us Inc., which became the first to use the Amazon service in August 2000.

The business of selling other companies' goods has been a growing segment of Amazon's business, rising from 13% of all items purchased on Amazon during the first quarter of 2002 to 19% in the same period this year. The figure includes items sold by individuals through the company's Marketplace program, which allows Amazon to collect fees for every transaction brokered through its Web site.

"It's just getting to be a larger and more integral part of our business," Amazon spokesman Drew Herdener said. "That's why we created a subsidiary." Amazon Services was officially created in March, he said.

Amazon collects fees from retailers for services ranging from operating their Web sites and processing their transactions to shipping their merchandise and handling their customer service operations. The company would not say how much it charges retailers for those services.

The business is attractive for Amazon because it expands the Seattle company's own product lineup through Web links to other retailers. It also involves less risk for Amazon because other retailers own the actual inventory, said Dan Geiman, an analyst with the Seattle-based investment bank McAdams Wright Ragen.

Amazon shares Tuesday gained 39 cents to $34.07 in Nasdaq trading.

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