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Divorce Court, Toy Story Style
washingtonpost.com Staff Writer Tuesday, June 29, 2004; 9:58 AM
The Seattle Times was the first to report the development on Saturday, reporting that Amazon's "countersuit attempts to prick holes in a partnership universally lauded for allowing Amazon and Toysrus.com to remain competitive online at a time when Wall Street began doubting the viability of e-commerce. ... Toysrus.com paid handsomely for the right to exclusivity -- more than $200 million since the start of the agreement, according to Toysrus' lawsuit. But in Amazon's counterclaim, the Seattle-based online retailer said Toysrus.com has failed to effectively choose the top toys and baby products and to keep products in stock. During peak holiday buying weeks last year, Toysrus.com was out of stock on more than 20 percent of its most popular products, the countersuit said." CNET's News.com reported that Amazon "asked that the court move quickly to end the partnership, thereby giving it sufficient time to recruit additional toy vendors in time for this year's holiday buying blitz."
The Wall Street Journal has more details on the Amazon countersuit: "In unusually harsh language directed at a once-close partner, Amazon's complaint, filed in New Jersey Superior Court in Passaic County, refers to Toys 'R' Us's 'chronic failure' to live up to obligations under the two companies' contract. ... In its counterclaim, Amazon, of Seattle, denies that it breached its agreement with Toys 'R' Us, saying the language of their contract allows for exceptions that permit Amazon and other merchants to sell products that compete with offerings from Toys 'R' Us. Amazon further alleges that it urgently needs other merchants to list competitive products on Amazon because Toys 'R' Us has failed to keep toys and other items in stock. ... Amazon also alleges that Toys 'R' Us has failed to provide Amazon with a comprehensive selection of toys for sale on the Amazon site -- in particular, low-priced toys."
The Associated Press said Amazon's claims that popular items weren't available during the holidays hurt "efforts to compete with Wal-Mart Stores Inc., the nation's top toy seller. Both Amazon.com and Toys R Us seek a judgment that the other is violating the agreement. Toys R Us seeks unspecified monetary damages for breach of contract, or a ruling that would void the contract and force Amazon.com to return the $200 million."
Toys "R" Us is just one of slew of retailers that Amazon.com has partnered with. "Amazon began hosting Web stores for Toys 'R' Us in 2000 as part of a 10-year agreement. The deal was the first major alliance Amazon struck with a brick-and-mortar retailer. Since then, the company has signed deals with Target, Circuit City and other companies to host their online stores," TheStreet.com explained. The Financial Times also reported on Amazon's partnership strategy: "Amazon has moved from its roots as an online bookstore to become an online shopping centre, selling goods from other retailers. This strategy, launched with its partnership with Toys R Us, has been a key element of Amazon's growth. Unlike its books business, Amazon does not hold these products in its warehouses and fulfil [sic] customers' orders: its partners do that. Amazon handles the orders and takes a commission."
Chance For Reconciliation? Amazon.com plans to talk to analysts about its second quarter earnings for this year in a July 22 conference call. Expect the fight with Toysrus.com to be among the topics of discussion. The call will be webcast.
The Jungle Book
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