According to the two companies, the toy and video game store is scheduled to be launched this fall, with the baby products store due to follow in the first half of next year. Online shoppers who visit Toysrus.com, its Babiesrus.com affiliate or the toys section of Amazon's website will be redirected to the new co-branded sites, officials said during a press conference Thursday morning.
Under a 10-year agreement between the two companies, Toysrus.com - with help from Toys R Us - will identify, buy and manage the product inventories to be sold through the two new sites. Amazon will be responsible for website development, order fulfillment and customer service.
Amazon will be compensated through a combination of periodic fixed payments, per-unit payments and a single-digit percentage of revenue, the companies said. In addition, the Seattle-based company will receive warrants that enable it to buy an ownership position of up to 5 percent in Toysrus.com.
"This is a huge win for our customers," said Amazon founder and CEO Jeff Bezos in a statement. While the company's current toys and games business "has grown rapidly," the alliance with Toysrus.com will bring Amazon customers a greater and more diverse selection of products, Bezos said.
But both Amazon and Toysrus.com have had problems in recent months. For example, Toysrus.com was one of seven online retailers fined last month by the US Federal Trade Commission for making late deliveries to online customers during the 1999 holiday shopping season.
And Amazon has been hit in the past few weeks by an $US89 million second-quarter loss, the resignation of its president and chief operating officer, the need to restructure financial deals with other unprofitable online retailers in which it has invested and a pricing glitch that led some toys to be priced incorrectly on its website.
Alan Alper, an analyst at Gomez Advisors, said Amazon overstocked toys last year so "no child would be without a toy at Christmas," but then took it on the chin when it was left with a huge inventory after the holiday season. And Toysrus.com also is still trying to cope with its inability to satisfy all of its customers last Christmas, he added.