Giant e-tailer Amazon.com announced deals today and on Friday that are expected to bring in $187.5 million from equity partners that will promote their products to Amazon’s 16 million online shoppers.
In making the deals, Amazon announced that it will receive $105 million over the next three years from online pharmacy Drugstore.com, Inc and $82.5 million over the next five years from online auto seller Greenlight.com.
In the deal with Drugstore.com, Amazon disclosed today that it will pay $30 million to boost a minority stake it already holds in the online drugstore to 28 percent. In the deal with Greenlight.com, Amazon said last Friday that it will to buy five percent of the company and receive stock warrants to increase its stake in Greenlight.com to as much as 30 percent.
Greenlight Builds Online Dealer Network
Greenlight.com, based in San Mateo, California, is building a network of car dealers that will allow consumers to order customized cars online and then arrange delivery and maintenance from its group of local dealerships. So far, the site has formed relationships with car dealers in Georgia, North Carolina and Florida.
Greenlight.com’s national rollout is planned for early spring, officials added.
Drugstore.com To Play Larger Role on Amazon Site
As part of the deal, Amazon and Drugstore.com will integrate a number of their shopping features and create a Drugstore.com shopping ”tab” at Amazon.com.
It is believed to be the first time that an Amazon.com investment partner will be prominently featured as a permanent part of the company’s site.
For its part, the deal with Amazon.com comes on the heels of Drugstore.com’s acquisition earlier this month of cosmetic site Beauty.com. In that deal, Drugstore.com paid 1.3 million in stock for the site, with access to a larger share of the $6.2 billion prestige beauty market, a much-coveted online market. Although Beauty.com retains its own URL and autonomous merchandising, marketing and editorial content, Drugstore.com will expand the cosmetic site’s infrastructure, technology and customer service capabilities.
Amazon.com Spending Spree
Amazon has been on a spending spree since 1999. Last year, Amazon pumped money into Pets.com and Homegrocer.com, and expanded its offerings to include online auctions, e-greeting cards, toys, and electronics.
In addition, the company launched zShops, a vehicle that lets smaller merchants sell virtually anything to Amazon’s customer base.
Profits Nowhere in Sight
Despite the expansion, Amazon’s inability to show a profit is beginning to raise some serious concerns on Wall Street. Even after doubling sales over the holiday quarter to $650 million, Amazon’s stock fell 15 percent as investors responded to the company’s warning of sizable losses.
To make matters worse, Amazon.com blamed its upcoming losses on an overstocking of toy inventory and the fact that some items did not sell as well as expected.
Analyst Increases Projected Losses
Thomas Courtney, an analyst with Banc of America Securities LLC, has increased his estimate of Amazon’s fourth quarter losses from his original estimate of 48 cents a share to 55 cents a share. He added that Amazon’s profit margin would also be lower than expected because of higher distribution costs.
Some industry observers believe that Amazon will not post its first annual profit until 2002, while others wonder if the e-tailer will be able to reach profitability before it runs out of cash.