Amazon.com expands retailing empire

Amazon.com is expanding its Web retailing empire even further, announcing plans Tuesday to open four new shops online.

Amazon, (Nasdaq: AMZN), which has come to dominate the books and music categories online, will open up stores Wednesday for home improvement, software and video games. It will also set up a "gift ideas" store.

Amazon also announced plans to acquire Tool Crib of the North, a catalog company selling power tools and equipment. Amazon said it was not purchasing the company's five retail stores in North Dakota and Minnesota. Financial details of the deal were not released.

The 'uber-retailer'?
The new stores build on Amazon's plans to become the uber-retailer online.

"The vision is ... to be the best place to find, discover and buy anything you want online. We started with books, added music and video; now we're adding software video games and home improvement," said Jaleh Bisharat, vice president of marketing at Amazon. "It's just like Nordstrom, which started with shoes and now is a well-respected department store."

Amazon had been rumored to be interested in the home goods and software markets. The company has been quietly selling software for some time, although it does not have a designated store for such items. Amazon also sells some video games online now through its toy store.

The toy store was part of the company's last big expansion this summer, when it opened up that store and a consumer electronics shop.

The software category would seem to be a natural for Amazon, and it should be a good market for the company. Jupiter Communications predicts that half of all software products will be bought online by 2003.

Bisharat said software and video games were two of the most popular search requests in the existing store.

"It's all about selection, convenience and information," said Richard Chin, product manager for the software store. "We have thousands of titles and we've developed a bunch of features over time that we can roll out in ways our competitors can't. If I buy a piece of software and I want a manual, or I buy a game and I want a joystick, I can do that."

Ever-expanding retail reach
The online giant has become known as the Wal-Mart of the Web for its ever-expanding retail reach. With the launch of its zShops program, which allows small shops to sell through Amazon's site, it's able to reach consumers in just about every category.

But the company has spent money almost as fast as it has made it. The company has poured money into its infrastructure, adding warehouses and distribution centers. Last month, the company's stock plunged after the company said that while fourth-quarter revenue would be up, it was not operating efficiently and there was no way to predict when expenses would go down.

But by opening up new stores, and broadening its product lines, the company should be able to increase the average customer order, said Jupiter analyst Mike May.

"The more categories they add the more cross-selling opportunities they have," May said. "Ultimately they're looking to increase lifetime value."

May said that while consumers unfamiliar with the company may not go looking for Amazon when they're shopping for hardware, current Amazon customers will likely try it out.

The home improvement store will sell electrical and lighting products, hardware, housewares, lawn and garden products, outdoor living products, plumbing supplies, painting supplies and tools. Costs will be $4.95 per shipment, regardless of the size or weight of the order. The company will offer free pick-up for some returns.

Challenges ahead
Amazon will face some challenges in the category, similar to ones it faced when it launched its electronics store, namely, competition from offline powerhouses. All of the major offline hardware chains have announced plans to begin selling online.

But Amazon thinks it can win out by pushing customer service, Bisharat said.

"The in-store experience can be not that pleasant. You go to a large store and if you're not that educated, it can be unpleasant," she said. "It is an information-intensive category. Prices can be high, and people want to make sure they get the best item."

Amazon launched a special gift section last holiday season, and has taken the idea further this year. The "gift ideas" store will let consumers search for gifts items by "personality types" such as Globetrotter, the Humor Monger, Sports Enthusiast and Culture Vulture.

Other features will allow consumers to send individually wrapped gifts with cards and personal messages, and let them ship to multiple addresses from a single check-out.