Amazon.com in deal with luxury retailer Ashford.com
Added: (Wed Dec 01 1999)
Pressbox (Press Release) -
By Monica Summers
NEW YORK, Dec. 1 (Reuters) - First it was books, then it was toys. Now customers of Web retailing behemoth Amazon.com Inc. (NasdaqNM:AMZN - news) will have a place to buy diamonds and other luxury goods through a deal with Ashford.com Inc. (NasdaqNM:ASFD - news).
The two companies on Wednesday inked multimillion deal in which Amazon.com will make a $10 million minority investment in Ashford.com and in return will hold about a 16.6 percent stake in the company valued at about $133 million, Ashford.com said.
The marketing deal would allow Amazon.com's 13 million customers to tap into the $200 billion luxury goods market for products such as diamonds, watches and writing instruments, among other things.
Shares of Amazon.com fell 5-3/8 to close at 85-1/16 on the Nasdaq stock market on Tuesday. Ashford.com shares also fell 2-3/8 to close at 18 on the Nasdaq.
"Our goal is to be the place where people can find and discover anything they want," Paul Capelli, a spokesman for Amazon.com, told Reuters. "We're always looking at ways to expand our selection that makes sense for our customers."
"The more that we can expand our selection the more we can offer our customers and the closer we can be to that vision," Capelli said. "The key part of it is the online shopping experience because we've been investing in our customers for four years now by providing them with great online value."
Ashford.com carries a wide selection of diamonds and more than 12,000 watches, designer jewelry, leather accessories, fragrances, ties, scarves and writing instruments from more than 300 top brands such as TAG Heuer and Montblanc.
Ashford.com Chief Executive Kenny Kurtzman told Reuters Amazon.com will initially feature Ashford.com as a key retail partner on the site, but said he expects the marketing relationship will develop further over the life of the deal, which lasts through the end of 2000.
"We're very excited about working with the leader in e-commerce," Kurtzman said. "And I think they're excited because of our position in the luxury goods category."
Ashford.com targets an emerging market segment known as the "mass affluent" -- customers that are part of a new and growing demographic with more than $1 million in assets, many of whom come from middle-class origins rather than inherited wealth.
Kurtzman said the average order size per customer is about $500, but since the site started offering diamonds and jewelry in October customers have gone so far as to purchase $40,000 diamonds through the site.
He added that he is comfortable with analysts estimates of about $15 million in sales for the fourth quarter.
About 48 percent of affluent households, or households with more than $750,000 in investable assets, use the Internet, while only 33 percent of the overall population are online, according to market research firm Forrester Research Inc.
Kurtzman said Ashford.com's site has seen a large jump in traffic since the Thanksgiving holiday, with about a 40 to 50 percent jump in traffic over October when the site had about 500,000 unique visitors, a number he expects to ramp up as the holiday season continues.
"I think (the deal) can only mean good things for Ashford.com and trouble for their competitors in the luxury retail space," said Lisa Allen, an analyst with Forrester.
Allen said Ashford.com's major competitors include Internet retailer Mondera.com and Luxuryfinder.com, as well as traditional retailers that have developed an online presence like Tiffany & Co. Inc. (NYSE:TIF - news), Neiman Marcus Group Inc. (NYSE:NMGa - news).
"The benefit for Amazon.com is that by vesting in companies like Ashford.com, they're able to start leveraging their customer base and make more money off their existing customers," Allen said.
Kurtzman said Ashford.com plans to have all orders placed delivered in time for Christmas and said it will ship every order overnight free of charge. Each shipment is insured for up to $1 million, he said.