Circuit City Plugs Into Amazon to Form Partnership
Amazon.com said Monday that customers soon will be able to buy merchandise from Circuit City Stores Inc. on its Web site and pick up their orders at the electronics retailer’s 600 stores.
The partnership, which will launch in November, gives the perpetually struggling Amazon another high-profile partner. Earlier deals were made with toy retailer Toys R Us Inc. and bookselling chain Borders Inc., and Amazon executives repeatedly have said they were searching for more.
The deal with Circuit City allows Amazon, which has been having trouble getting access to electronic goods from such key manufacturers as Sony Corp., to expand its product range while limiting its inventory. And it might boost electronics sales by making the process more convenient for impatient customers.
The companies didn’t release the terms of the deal, but said Amazon will receive a percentage on all Circuit City electronics merchandise ordered through Amazon’s Web site. Amazon will process the transaction, while Circuit City will accept in-store returns.
The relationship may be expanded later, but for the moment its borders are well-defined and somewhat limited.
Any equipment that is exclusive to Circuit City cannot be shipped by Amazon, while any equipment that is exclusive to Amazon cannot be picked up at Circuit City.
Shares of the Seattle-based Amazon, which had fallen 40% in the last month over concerns about whether it would be profitable, rose 41 cents, or 4%, Monday to $10.40 on Nasdaq.
Shares of Circuit City, which is based in Richmond, Va., fell 55 cents, or 3.2%, to $16.85 on the New York Stock Exchange.
The retailer has been doing poorly compared with chief competitor Best Buy Co., with revenue for the quarter ended May 31 falling 13% and net income down 70%. Circuit City doesn’t break out its online sales.
Sanford Bernstein analyst Faye Landes, looking at the deal from Amazon’s point of view, said it is “a slight positive despite the potential for consumer confusion, but not a panacea for Amazon’s challenges in consumer electronics.” Henry Blodget of Merrill Lynch, traditionally more of an Amazon bull, called the pact “a positive.”
In the quarter ended June 30, Amazon recorded $111 million in revenue in its U.S. electronics, tools and kitchen category. That was only a 21% increase over the previous year, which isn’t the sort of growth that Internet companies are supposed to produce. Even worse, Amazon lost $41 million on those sales.
The difficulty of selling electronics online was underscored last week, when Aliso Viejo-based Buy.com was delisted from the Nasdaq stock exchange. Once the leader in electronics online, Buy.com’s revenue fell 50% in its latest quarter. Its work force has been cut from 230 in January to 65.
