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Amazon Ushers In Era of E-Department Stores

By Rob Conlin
Nov 10, 1999 12:00 AM PT

Leading online retailer (NYSE: AMZN) has taken a giant step away from its original incarnation as an online bookseller by announcing the launch of home improvement, software, video game and gift idea stores. Richard Chin, Amazon's director of product development, told the E-Commerce Times that the corporate plan has always been to offer a wide range of items, despite public perception to the contrary.

Amazon Ushers In Era of E-Department Stores

"Many people fondly remember us as a bookseller, and it has only been 18 months since we started offering other categories, so that's understandable," said Chin. "I hope we can broaden that perception. We've always said we wanted to be the one place that people could come online to buy from. Our vision has always been broad and I think our customers are pleased to see us expand this way."

More Stores in Store

The four new stores boost Amazon's product line significantly. The company now offers 18 million unique items, adding to its book, music, toy and electronics products line.

Amazon also announced the acquisition of Tool Crib of the North, a 50-year-old tool and equipment catalog company. Amazon will offer the company's line of tools and equipment in its home improvement store.

Diversification Continues

In the 18 months since Amazon first introduced new products to its site, the company has invested in everything from online drugstores to pets.

Toys and electronics were added to the mix recently, and Amazon also unveiled zShops, a service that allows merchants to rent space on its Web site. In preparation for the new product launches, Amazon also spent the summer building up its distribution infrastructure and bulking up its work force to cope with the anticipated demand.

The company has no intention of putting a halt to the expansion. Chin said that Amazon anticipates opening more stores in the future.

"This is a very formative time for the industry and we see it as a huge opportunity to expand," said Chin. "It's essential for us to invest in this now and position ourselves to take advantage of the opportunity."

Wall Street Reaction Mixed

Amazon's shares shot up 14 percent Monday after the announcement. By mid-day Tuesday, however, the stock slipped nearly seven percent and dropped nearly half the gain.

Despite its clear-cut dominance as the leading Internet retailer, Amazon has not reached profitability in its five-year existence, and the company is preparing investors for increased spending in the future.

Last month, Amazon reported third quarter sales of $356 million (US$) and a loss of $79 million.

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