Richard Joly on 4 Mar 2001 15:15:07 -0000 |
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[Nettime-bold] wallmart/amazon |
http://www.sunday-times.co.uk/news/pages/sti/2001/03/04/stibusnws01019.html March 4 2001 BUSINESS NEWS Amazon and Wal-Mart in alliance talks Dominic Rushe AMAZON, the online retailer, and Wal-Mart, the world's biggest shops group, are in secret talks to form a "strategic alliance". Jeff Bezos, Amazon's billionaire founder, and Lee Scott, Wal-Mart's chief executive, are hammering out details of an agreement that could be announced within six weeks. Under the terms of the deal, Amazon would become Wal-Mart's e-commerce supplier. Wal-Mart would gain access to the e-tailer's expertise in managing the retail chain, from online ordering to home delivery. In return, Amazon would gain a presence in Wal-Mart's 4,500 stores across the world, a cash injection and a percentage of the sales it makes through the retail giant. Wal-Mart is unlikely to take an equity stake in Amazon. The move would be a welcome relief for Bezos. Amazon's share price has fallen 83% in the past year and in less than two years the company's market value has plummeted from $36 billion (£24.5 billion) to $3.6 billion. One executive close to the talks said: "Jeff wants to build the biggest, best multi-category online retailer in the world. He has the technical expertise but not the sales, the customers or the money any more. Wal-Mart has the sales, the expertise and the money, but it doesn't have a strong online presence. It's a neat fit but not one that will be easy to pull off." Amazon has spent millions developing what is widely regarded as the best state-of-the-art online sales-management system. It has also built one of the most trusted brand names on the web and its customer base is still growing fast. Some areas of the business, such as the original book-selling business, are now profitable. But moving into other areas has proved problematic and investors now want to see the company move into profitability overall. Amazon's high-speed entries into new categories such as electrical goods and toys have left the firm grappling with huge losses. Its move into toys proved particularly expensive when the company was left with large unsold stocks. The internet retailer's lack of expertise in toy retailing cost it $39m in 1999. The losses led Bezos to merge his toy division with the online division of Toys R Us. Amazon maintains the site and handles delivery while Toys R Us is responsible for merchandising. A Wal-Mart deal would give Bezos the same sort of back-up but on a grander scale. With annual sales of $200 billion, Wal-Mart is by far the biggest buyer of goods from CDs to toothpaste. The prices it can demand from suppliers and its expertise in buying and merchandising are unparalleled. Wal-Mart is keen to expand its online activities at a time when many of its start-up rivals are falling by the wayside. The retailing behemoth has so far failed to make its presence felt on the internet. Last week Walmart.com, a joint venture with the American venture-capital firm Accel Partners, laid off 24 employees, 10% of its workforce. The company is now eliminating products such as low-priced clothing and cosmetics, whose shipping costs make it illogical for customers to buy them online. Greater emphasis will now be given to higher-price items, such as jewellery. The entire site was taken down for most of October last year. Walmart.com consistently ranked among the most-visited e-commerce sites in November and December. Both companies declined to comment on their talks. Next page: Lloyds to dump Abbey chief if takeover gets go-ahead Next: Lloyds to dump Abbey chief if takeover gets go-ahead Copyright 2001 Times Newspapers Ltd. This service is provided on Times Newspapers' standard terms and conditions. To inquire about a licence to reproduce material from The Sunday Times, visit the Syndication website. _______________________________________________ Nettime-bold mailing list Nettime-bold@nettime.org http://www.nettime.org/cgi-bin/mailman/listinfo/nettime-bold