Richard Joly on 4 Mar 2001 15:15:07 -0000

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[Nettime-bold] wallmart/amazon

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, 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

 The entire site was taken down for most of October last year. 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


                                                    Next: Lloyds to
                                                    dump Abbey
                                                    chief if takeover
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