Amazon, Ofoto click in online photo pact

Amazon.com is taking up photography.

The Seattle-based e-tailer today launched a new camera and photo store in partnership with start-up Ofoto, which provides online photo services.

The store, which will appear as a "tab," or link, on the Amazon site, one of the most frequented on the Net, will offer customers a way to find and buy cameras, optical gear, and other photo-related accessories such as film, batteries, lenses and camera cases.

Under the agreement with Berkeley, Calif.-based Ofoto, Amazon, which sells cameras through its electronics store, will also provide photo services that allow customers to process both digital and film photos via the Web, store photos online, organize and enhance prints in online photo albums, and share photos with friends.

Amazon is making the move in a field flooded with competition from other Net giants, including America Online and Yahoo, along with a wave of upstarts that are already offering a wide range of digital photo services.

AOL operates You've Got Pictures, its own photo station, created with Eastman Kodak. Yahoo, which launched Yahoo Photo earlier this year, offers customers a service to upload, store, share and develop photos over the Web. The site also lets people create photo albums that can be viewed publicly or by a predetermined group.

Last year, Netscape Communications founder Jim Clark launched Shutterfly.com to offer enhanced digital printing services over the Web. Even Hewlett-Packard has its own online photo album service, Cartogra, which allows friends and family to share pictures over the Web.

At Amazon's new camera and photo store, shoppers will be able to browse a list of product categories including digital cameras, film cameras, camcorders, scanners, binoculars and photo albums.

Amazon began as a Net bookseller and later added music, video and toy offerings. The company, which has been steadily branching out into other retail outlets, now also sells kitchenware, garden furniture, hardware tools, and health and beauty products.

The online megastore recently introduced a car site in conjunction with Greenlight.com, a Net car seller.

Despite news of the store launch, shares of Amazon were down in early morning trading, shedding $1.06 to $34, after an analyst at an influential investment bank questioned the company's business strategy.

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Lauren Cooks Levitan Analyst, Robertson Stephens  Is the Ofoto deal a step in the right direction?  • RealAudio • Windows Media Amazon's challenge is to be able to deliver a broad range of goods efficiently.  • RealAudio • Windows Media

In research notes, Robertson Stephens analyst Lauren Cooks Levitan asked whether Amazon's product broadening strategy translates into long-term profits. Levitan, who is conducting a survey on Amazon's long-term business strategy, said that "too much product diversification appears to result in inefficient fulfillment operations."

As the company expands into new categories beyond its core products of books and music, Levitan said she believes the "exhaustive assortment" could actually serve as a structural obstacle for the company to achieve operating efficiency, largely because of increased costs to ship and fulfill multicategory and multiproduct orders.

Another analyst raised similar concerns this summer, saying most consumers still see Amazon as a book and music seller rather than as a retailer of a wide array of products.