By Keith Regan E-Commerce Times
06/08/01 8:28 PM PT
Analysts say that deals like Amazon's move to outsource
electronics fulfillment to Overstock will help the e-tail giant boost its
profit margins by reducing the cost of shipping and handling.
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Further paring its focus to its strong suits of marketing
and customer service, Amazon.com (Nasdaq: AMZN) has outsourced
part of its electronics fulfillment to
Overstock.com.
The agreement calls for Salt Lake City, Utah-based Overstock
to fulfill orders for about 700 different items in Amazon's electronics category.
Amazon will continue to handle order-taking and some other
back-room duties, and will receive a percentage of all sales made.
A spokesman for Overstock confirmed that the one-year deal may
be expanded to other product categories in the future.
Word of the partnership came the same week that Amazon announced it would begin to
sell personal computers on its
site for the first
time, during the second half of this year. However, there
are currently no plans for Overstock to handle that category.
Growth Spurt
Launched in October 1999, Overstock has enjoyed a recent surge
in growth and with 4 million regular visitors each month, now draws more
traffic to its site than Walmart.com (NYSE: WMT) and
Buy.com (Nasdaq: BUYX).
The growth spurt is due in part to the misfortune of other
dot-coms, whose surplus merchandise Overstock sells at
discounted prices. Overstock also sells the excess
inventory of offline and catalog retailers.
Overstock chief executive officer Patrick Byrne said some
firms choose Overstock to avoid selling discounted merchandise
through their own stores or Web sites.
"The last thing a brand-name company wants to see is their
products in a bin at a basement store -- or for that matter,
in their own store," Byrne said. "It cheapens their brand
and teaches their customers to wait for lower prices."
Focus on Strengths
For Amazon, the deal mirrors an earlier agreement
with Ingram
that involves sending books directly to customers.
Analysts reportedly say the deals will help Amazon
boost its profit margins by reducing the cost of
shipping and handling merchandise, which is often a
money-losing proposition for e-tailers.
The partnership gives Overstock.com access to Amazon's base of
23 million customers, widely viewed as one of
Amazon's most valuable assets in its bid for
survival as the e-commerce industry matures.
Overstock has been eager to expand its reach into new product
categories as well. In February, Overstock unveiled its
own bargain travel section,
offering airline travel obtained through a ticket consolidator,
as well as discounted hotel stays.
Study: European Net Travel Market Surging June 08, 2001
Jupiter said that a seasonal trend has emerged
with consumers spending more time
on travel sites during peak holiday times than on retail and news sites.
Related Stories
Analysts: Amazon Will Survive June 07, 2001
While Amazon is burning a trail to profitability, it is the 'reach' of the
e-tail giant and its technology that will secure its place as
one of the few pure plays to survive on the Net, analysts say.
Amazon Says Profits Will Come This Year June 06, 2001
The key to Amazon's success in the future is a strategy of
globalization and diversification, the e-tailer's
CFO Warren Jenson told analysts Tuesday.
Report: Four Web Sites Control Half of Surfing Time June 04, 2001
Jupiter said that marketing and advertising power has replaced infrastructure investment
as the main barrier to entry and success on the Web.
Overstock.com Enters Travel Fray February 14, 2001
Although Overstock said that its fares will 'meet or
beat' those offered by the other online travel sites, some Overstock.com
fares were more expensive than the competition.
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