FRAMINGHAM (08/11/2000) - Amazon.com Inc. and Toysrus.com Inc. this week announced that they're teaming up to launch a new co-branded online toy and video game store this fall and a baby products site in the first half of next year.
"[The alliance] will allow both of us to reach profitability before we would have [on our own]," Jeff Bezos, founder and CEO of Amazon.com, said.
Under a 10-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 CEO and a pricing glitch on its Web site.
Analysts said the deal will allow both companies to focus on what they do best.
"This is a very good synergy," said Greg Girard, an analyst at AMR Research Inc. 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," said Alan Alper, an analyst at Gomez Advisors Inc. in Lincoln, Mass. "And Toysrus gains credibility by teaming up with Amazon, which handles the customer experience better than most any other online retailer."