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Amazon quietly adds a touch of luxury

The company has been selling high-end goods for months, though no formal announcement has been made. A spokesman cites an upcoming "second phase" as a reason.

Breakfast at Amazon's?

The Web superstore, which has pitched itself to customers as a low-cost leader, quietly launched a luxury-goods store on its site and has been operating it for several months. So while customers can order a $2 used paperback or a $14 CD, they can also plunk down $950 for a women's handbag or nearly $20,000 for a men's gold wristwatch.

Amazon operates the store with online luxury-goods company eLuxury, a division of Europe's LVMH Moet Hennessy Louis Vuitton and French tycoon and Internet booster Bernard Arnault, perhaps best known in the online world for bankrolling titanic Web disaster

Executives at San Francisco-based eLuxury did not return phone calls seeking comment.

Amazon opened the luxury-goods store last November, said company spokesman Bill Curry, though it has yet to announce the store's launch.

"There is still a second-phase element to the launch," Curry said.

Safa Rashtchy, senior analyst for U.S. Bancorp Piper Jaffray, said he did not know anything about the store's existence and said he thinks Amazon may have kept the launch quiet because it may not be expecting much from the store in terms of sales.

High-ticket items are a departure for Amazon, which built its business by selling low-end items like books, videos and CDs. But the eLuxury deal was struck by Amazon's Services unit, a division of the company that helps other retailers with their online stores and allows Amazon to avoid the risks of handling inventory.

Amazon investors have cheered the company's Services deals because the margins are often much higher than in its retailing business. The Services unit, for example, builds or hosts Web stores, handles distribution and fulfillment, or simply allows retailers to piggyback on Amazon's traffic by posting links on Amazon's home page.

Curry said eLuxury has agreed to share a percentage of the sales from the jointly run store in exchange for access to Amazon's 29 million customers. Curry declined to discuss other financial terms of the deal other than to say it is similar to the one Amazon struck with Web travel agencies Expedia and Hotwire.

Those companies pay fees to Amazon and share a percentage of sales in exchange for being able to market their services to Amazon's customers. The partnership, however, has shown some cracks. Last month, representatives from Expedia and Hotwire told CNET that they were disappointed with the way Amazon has promoted the travel store.

Rashtchy said he is still unsure if the Internet is the best place to successfully sell "the really high-end stuff. You want to go to a shop and really be pampered when you spend that much."