E-Commerce giant Amazon.com (AMZN - Analyst Report) plans to feature products of various suppliers on its website to strengthen its grip on the online retail industry, according to a Wall Street Journal report.
Reportedly, Amazon is in talks with 10 major retailers along with several popular brands such as Ralph Lauren and J. Crew to display their merchandise on its website. However, instead of selling the goods directly, Amazon will provide inbound links to the retailers’ websites. In return, the online retail major will receive a certain fee for sending customers to the retailers’ website.
Amazon is making extensive efforts to tap this significant opportunity arising from the growing craze for online as well as mobile shopping. Online retail sales improved 10.3% on a year-over-year basis in the fourth quarter of 2013, according to IBM's (IBM - Analyst Report) latest Digital Analytics report. The report tracks approximately 800 e-Commerce websites in the United States.
The strategic move on Amazon’s part will expand its product range increasing the inventory. Additionally, the tie-up will help the company gather valuable consumer data to enable it to price its products more competitively.
The retailers will also gain increased exposure for their products. Their presence on Amazon would potentially give a boost to their sales but the product presentation on the site will not be under their control.
Additionally, Amazon plans to launch a television set-top box (STB) by March this year which will stream video content. The STB will not only compete directly with Apple Inc.’s (AAPL) Apple TV but also with similar products from Roku Inc. and Boxee Inc., as well as gaming consoles from Microsoft Corp. (MSFT - Analyst Report) and Sony Corp. (SNE - Analyst Report) that offer video programming.
We believe that new offerings on Amazon’s site will attract new customers, going forward.The company’s continuous efforts to make more money, despite significant competition from eBay (EBAY), Google (GOOG) and other online retailers will be something to watch out for in the near term.
However, Amazon’s continuing investments in fulfillment centers will hurt profitability, going forward.
Currently, Amazon has a Zacks Rank #4 (Sell).