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Amazon's "Everything Store" Ambitions Grow 1 Step Closer

By Andrew Tonner – Feb 21, 2014 at 1:42PM

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E-commerce kingpin Amazon is set to take its industry dominance to another level. (AMZN -1.57%) is bent on dominating the global e-commerce industry, and there's little any of us can do about it.

The company that started as a rather straightforward bookseller over the Internet has since ballooned into one of the powerful players in today's Internet economy. And in typical fashion, Amazon isn't resting on its laurels.

According to a report in The Wall Street Journal, Amazon appears to be hard at work trying to strike yet another key deal to further solidify its stranglehold on how we all shop online.

Let's make a deal
Apparently, according to "people familiar with the talks," Amazon is close to closing a deal with around 10 major retail names, such as J. Crew, Ralph Lauren, Abercrombie & Fitch, and Niemen Marcus.

Source: Amazon

The agreement would open the door for these retail names to begin to sell their goods through Amazon's online storefront for the first time ever, a move many predicted Amazon would eventually make but that retail companies have viewed with skepticism.

The actual transactions would still occur through each retailer's own website, allowing the companies to hold on to prized customer information. The retailers would pay Amazon for traffic referred to them via Amazon's online storefront and again when customers purchase something.

With a customer base numbering in the hundreds of millions, Amazon certainly could provide increased product visibility for companies that sign on to the program. Some believe this could also eventually open the door to Amazon opening its distribution system to major retail partners via its Fulfillment by Amazon program, although that appears to be further down the road.

However, this arrangement isn't without its potential risks as well. So why would these retail names consider striking a deal with Amazon now? 

Dancing with the devil
A key issue with this deal is what it would do to the retailers' brands. It certainly seems like adding highly valued goods that rely on strong brand association, like Abercrombie, could have a dilutive effect on their overall brand cachet.

All in all, though, this deal appears more mutually beneficial. For starters, there's little question that Amazon could help drive incremental traffic to major retailers, which would lead to increased sales. It appears Amazon's intentions are relatively modest at this point: to collect more shopping data on its customers while leveraging its nearly ubiquitous e-commerce presence to generate a little incremental referral traffic.

Amazon's corporate history is littered with industries it's entered and gone on to dominate. It's infamous for its willingness to drive margins to zero (or even lose money) in just about any area of its business in order to expand its presence in an area where it sees opportunity.

However, while Amazon often plays the role of the wolf in sheep's clothing in the world of online sales, this deal at least seems fairly innocuous on the surface.

Andrew Tonner has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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