E-tail giant Amazon.com (Nasdaq: AMZN) and Toysrus.com, the online division of venerable toy store chain Toys “R” Us (NYSE: TOY), announced a partnership Thursday to sell toys and video games.
The new co-branded store will be up and running this fall, in time for the crucial holiday season, and will be followed by a baby products store in the first half of next year, the companies said.
The firms are expected to split responsibility for operating the stores, with Toysrus.com identifying, buying and managing inventory, and Amazon handling site development, order fulfillment and customer service. The 10-year agreement also allows for global expansion.
No dollar value was given for the agreement, though the companies said Amazon.com will receive a combination of periodic fixed payments, per-unit payments and a single-digit percentage of revenue.
Amazon.com will also get warrants entitling it to a five percent stake in Toysrus.com.
‘A Huge Win’
“This is a huge win for our customers,” said Amazon.com Chief Executive Officer Jeff Bezos. “Our existing toys and games business has grown rapidly because customers appreciate our passionate focus on selection and customer experience.”
Toys “R” Us Chief Executive Officer John Eyler was equally enthusiastic.
“The strength of the Toys “R” Us brand and our merchandising expertise, combined with Amazon’s unbeatable Internet savvy, will create an online presence second to none,” Eyler said.
E-tailers Branch Out
Toysrus.com has been actively expanding its presence in the increasingly competitive Internet toy market this year, fueled in part by a $57 million (US$) investment from Softbank.
Amazon has also been expanding its offerings, though investors have not been enthusiastic. Just a day ago, Amazon shares fell as Sanford C. Bernstein initiated coverage of the stock with an underperform rating, with analyst Faye Landes saying the company’s strategy of branching out beyond books and music is not catching on with customers.
Other analysts have questioned whether the giant e-tailer will run out of cash before the holiday season arrives.
In early trading Thursday, Amazon shares were up 3/16 at 31 1/16. Toys “R” Us shares were also up 3/16, at 17 9/16.