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Last Updated: Wednesday, 20 April 2005, 15:05 GMT 16:05 UK
Amazon pushes e-tailing expertise
By Alex Kleiderman
BBC News business reporter

Model wearing M&S dress
Will a slicker website help M&S boost sales and attract shoppers? built its reputation as one of the first places to buy books and CDs on the internet in the mid-1990s. It is now increasingly cashing in on its credentials as an online retail pioneer by selling its expertise to major store groups.

On Tuesday, UK High Street chain Marks & Spencer became the latest taker when it announced a tie-up with Amazon in a bid to breathe new life into its online business.

The deal is the first for the recently set-up Amazon Services Europe, which will look after the technical side of the M&S website.

Amazon already runs e-commerce sites in the US for a string of retailers including Target, the NBA and Toys 'R' Us.

The move into Europe comes as Amazon's own retail business starts to face more competition.

Its sales reached nearly $7bn (3.6bn) last year, but analysts say expansion into areas such as electronics goods, homeware and jewellery has started to put pressure on its profit margins.

Tech struggle

Amazon's new Luxembourg-based division aims to provides tailored services to retailers and positions the company as a technology service provider in Europe alongside the likes of IBM.

E-tailing is something it has as a core competence, and it can leverage that to sell to retailers
John Davison, Gartner

"A lot of stores are struggling with how to operate a multi-channel sales environment," says John Davison, retail analyst at Gartner.

"Amazon is not what you would normally consider an IT services provider, but it has been pretty successful in running its own website.

"E-tailing is something it has as a core competence, and it can leverage that to sell to retailers."

Amazon will handle the technology behind the M&S site, and link the firm's in-store, telephone and online ordering systems.

Its visual presence is likely to be limited to a small "powered by" acknowledgement at the foot of the site's pages.

Financial terms of the tie-up were not disclosed, but an e-commerce service provider will typically take a cut of sales - as well as a contracting fee to cover the running of the infrastructure.

Missed orders

The Amazon deal is not strictly a departure for M&S, whose website already attracts about 24 million visits a year.

Amazon has been expanding its product range

The technology underpinning the M&S site is already outsourced to an outside firm, but the group acknowledges that it was in need of an update.

The site "creaked" before Christmas during a sale promotion offering 20% discounts, a spokeswoman says, meaning many customers were unable to place orders.

M&S believes taking advantage of Amazon's established technology will allow the website to reach its "full potential" from 2006.

Under the deal, M&S will hold onto responsibility for managing the site, as well as looking after distribution of products and customer service.

But it hopes that working with Amazon will improve the service it offers, allowing better graphics and search tools and allowing customers to track orders more easily.

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