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Amazon, Toysrus.com to Join Forces

Retailers will team up to sell toys, video games, and eventually baby products.

By Linda Rosencrance, Computerworld   

"[The alliance] will allow both of us to reach profitability before we would have [on our own]," Jeff Bezos, founder and chief executive of Amazon.com, says.

Under a ten-year agreement, Toysrus.com will identify, buy, and manage the product inventories, and Amazon will be responsible for Web site development, order fulfillment, and customer service.

Both Amazon and Toysrus.com have had problems recently. Toysrus.com was fined last month by the Federal Trade Commission for making late deliveries during last year's holiday season.

And Amazon has been hit in the past few weeks by an $89 million second-quarter loss, the resignation of its chief executive officer, and a pricing glitch on its Web site.

Analysts say the deal will allow both companies to focus on what they do best.

"This is a very good synergy," says Greg Girard, an analyst at AMR Research in Boston.

"Amazon.com seems to have overextended itself and is looking to Toysrus.com to provide it with back-end fulfillment and inventory management," says Alan Alper, an analyst at Gomez Advisors in Lincoln, Massachusetts. "And Toys R Us gains credibility by teaming up with Amazon, which handles the customer experience better than most any other online retailer."

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