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Dell adds weight to Amazon strategy

By promoting Dell's computer products, Amazon takes a step closer to becoming a comprehensive shopping site.

3 min read
An agreement to promote Dell's e-commerce site is Amazon's latest step toward establishing itself as a comprehensive shopping destination on the Web without the added burden of selling a greater variety of products directly.

In addition to the Dell agreement, which will send Dell's PC shoppers to Amazon as well, Amazon is experimenting with a "Shop the Web" service that allows visitors to comparison shop for other merchant offerings in a range of goods, from clothing to toys and games. The company also recently bought an equity stake in Drugstore.com, just as the online pharmacy sector is heating up.

The Dell deal is Amazon's first venture into the PC market, and is "an important agreement in Amazon's ever-expanding world of online retailing," said Marc Johnson, e-commerce group director at research firm Jupiter Communications. "It is notable that Amazon didn't take it on themselves" to try to sell computers, he added.

Like the Drugstore.com deal, the Dell agreement allows Amazon to test the waters in different categories without committing itself to a particular market. Hooking up with Dell, Johnson said, is to some extent recognition on Amazon's part that the PC business is a difficult one to enter, and one they might not want to get into directly.

"Our vision at Amazon is to be able to become ultimately a source for our customers where they can buy anything they want on the Internet," said Paul Capelli, an Amazon spokesman. "We are continuing to look at ways to bring customers a wide selection of products through partnerships, marketing relationships, or by expanding our product offerings."

Major vendors like Dell are eager to sign deals with Amazon because of its high traffic. Amazon had more than nine million unique visitors in January, making it the most popular e-commerce site on the Net, according to Media Metrix. Neither Dell, which targets small to mid-sized businesses, nor Amazon, which targets the consumer space, would estimate how much traffic the link exchange would generate.

"(Today's deal) will enhance [Dell's] ability?to open up or tap new portions of the market that we may not reach today," said Paul Bell, senior vice president of the home and small business group at Dell.

Dell said its Web site attracts about 25 million visits per quarter. "Dell is going to be sending Amazon a much lower traffic volume but a much more transaction-ready consumer," said Johnson. "Amazon will sends mounds of traffic, but traffic that has fewer targeted customers."

Dell said it sells more than $14 million in products each day over the Web, accounting for 25 percent of its business. Dell intends to do 50 percent of its business online by the end of 2000. Amazon reported $250 million in sales last quarter.

No financial terms of the agreement were disclosed.

"This really is just a statement of direction," said Bell. "It is the first step in what we think is a very exciting opportunity.

Amazon shares were 4 percent higher in afternoon trading to 135.13 while Dell dipped 0.85 percent. Amazon stock has traded as high as 199.13 and as low as 12.79 during the past 52 weeks. Dell hit a high of 55 and a low of 15.25 during the same period.