Amazon has been criticized by analysts about the performance of similar moves--expanding its store from the core business of books, videos and CDs to include selling kitchen products, toys, electronics and tools. Those expansions, made since late 1998, have come at a high cost and many of the businesses have been unprofitable and have slim gross profit margins.
But David Risher, Amazon's senior vice president of marketing and merchandising, said the new stores are part of an effort to sell more items and encourage customers to shop more frequently.
Risher told attendees at an Amazon analyst conference here that selling business books is expected to be a $100 million to $150 million business over the next two years. He didn't have any estimate for the new PC store.
Earlier Tuesday, Amazon Chief Financial Officer Warren Jenson said he is "highly confident" the company, which has never posted a profit, will deliver on its promise of turning a profit on a pro forma basis in the fourth quarter of this year. Jenson said Amazon will likely be profitable for all of 2002 on the same pro forma basis, which excludes a range of costs, such as interest on Amazon's more than $2 billion debt and charges associated with acquisitions.
Amazon international businesses posted a $145 million pro forma operating loss in 2000 on $381 million in sales. The international businesses posted a $79 million operating loss in 1999 on $168 million in sales.
The bookstore will target businesses and institutional customers such as schools. Amazon currently sells to such customers, but has not catered to them. The new store will allow institutions and businesses to use purchase orders to buy books through Amazon, Risher said.
The new PC store will be tied in to Amazon's electronics store and will help make that store a "destination site" for small businesses, Risher said.
PC sales have become a low-margin business as sales have slumped and competition has increased. And unlike books or videos, PCs become obsolete soon after they are released.
But Risher said that Amazon has set up its store to minimize its risks. Risher did not say whether the company has a partner for its PC store.