I Told You Sew, Amazon

If a stitch in time saves nine, then Amazon.com's (Nasdaq: AMZN  ) timely acquisition of online arts and crafts store Fabric.com may save it from making mistakes down the road.

Fabric.com specializes in custom-cut fabrics, patterns, and sewing tools. Yes, you can already buy some of those things through Amazon, but Amazon has never been deluded into believing that its brand can do it all. That's why the company launched Endless.com two years ago, as a high-end retailer for fashionable handbags, footwear, and accessories. It's why Amazon snapped up Audible -- the market leader in digital audiobooks -- even though many of its other digital-media initiatives are homegrown.

Will Fabric be a winner under Jeff Bezos' wing? It should be. Terms of the deal aren't public, but Amazon is unlikely to overpay for a niche website. It is doing well lately, so it's not as if the leading e-tailer needs to buy its way into relevance.

The move is simply a sound one. Instead of beefing up its home and garden category with custom-ordered fabric cuts, Amazon can cash in on a loyal and established audience of sewing enthusiasts. Amazon can then enhance Fabric's business by incorporating its checkout system and fulfillment prowess. No doubt, other advantages like the cross-selling opportunities and the economies of scale will come into play.

Just as Gap (NYSE: GPS  ) launched Piperlime two years ago as a way to enter the online footwear market, Amazon is well-served in introducing or snapping up specialty stores to feast on dedicated audiences.

Yes, Amazon sells engagement rings, but it will never have the panache of Blue Nile (Nasdaq: NILE  ) . This doesn't mean that Amazon needs to swallow down Bluefly (Nasdaq: BFLY  ) , Celebrate Express (Nasdaq: BDAY  ) , and PC Mall (Nasdaq: MALL  ) to matter more in specialty apparel, birthday-party goods, and computing products, though it certainly wouldn't hurt if the prices are right.

Amazon may have never been built to quilt, but it has bought its way into a niche of needle-gripping diehards.

For related Foolishness:

Gap is a Motley Fool Inside Value recommendation, and Blue Nile is a Rule Breakers selection. Gap and Amazon.com are Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz won a blue ribbon at his county fair for a pillow design he stitched back in third grade, but hasn't picked up any needlepoint since. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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  • Report this Comment On June 27, 2008, at 12:34 AM, LouieJunior wrote:

    Amazon believes the concept of "same store sales" doesn't apply to itself. They keep adding new selection and inventory to keep the top line growing -- adding stores like electronics, groceries, womens handbags, music, kindle, jewelry -- all new! This week they are adding office supplies and knitting supplies.

    Lots of revenue growth with nothing else.

    This music will end soon!

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