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Wednesday, 23 August, 2000, 20:08 GMT 21:08 UK
Amazon to sell cars
Greenlight navigation screenshot
The one-two-three of car buying, soon on Amazon's web site
Online retailing giant Amazon.com is adding new cars to its more familiar product line-up of books, videos and compact discs.

The service will be offered from Thursday through Greenlight.com, a Californian firm that allows customers to buy new cars, finance them and trade in their old cars.

For the Seattle-based firm this is a logic extension of its policy to broaden its product range through alliances with strategic partners.

However, this does not always work out. A week ago, Amazon had to remove the "Home products" tab from its navigation, after partner firm Living.com suspended trading following massive losses.

Newcarsamazon.com

Speculation over an Amazon car venture grew after the company registered car-related web domain names at the beginning of August.

Usedcaramazon.com, Newcarsamazon.com and sellcarsamazon.com were among the names registered.

But Amazon's deal with Greenlight has been in the making for much longer.

The online retailer took a 5% stake in Greenlight as early as January, with an option to boost this to 30% over the next five years.

Jeff Bezos, the founder and chief executive of Amazon, said: "Greenlight combines the interests of all parties - the customers, the dealers and the manufacturers - producing a simple and fast buying experience for customers."

New customers, better cash flow

While Greenlight can hope to massively increase its reach by tapping into Amazon's 23 million customer base.

But the deal is helping Amazon as well, by improving its cash flow situation.

Greenlight will pay Amazon $15.25m over the next two years for the privilege to feature as one of Amazon's product categories.

Greenlight has dealerships in 27 markets across the United States, including key areas like New York City, Detroit, Chicago, San Francisco, Washington DC and Seattle. The firm hopes to be present across the United States by early next spring.

The firm does not cut out the middleman, but helps customers to compare prices, select and customise a car, and order it online through a dealer.

Greenlight claims its prices "are typically those you would get if you spent two weekends negotiating with a number of dealers".

US car manufacturers are slow taking to online car selling.

They do not want to lose the crucial support of their extensive dealer networks across the US. At one point car makers threatened their dealers with sanctions should they supply cars to online dealerships.

Only a fraction of all new car sales in the United States are currently made online - about 4%.

But research by industry experts J.D. Power suggests that 40% of all buying decision are influenced by the internet, and the number is growing.

Doubts

For Amazon, the deal with Greenlight is yet another chance to prove the viability of its business model. Paying large amounts of money to portals like Amazon is costing partners dearly.

Unless they turn profitable quickly, Amazon may find itself in a situation where it adds and removes tabs from its navigation faster than customers care for.

Amazon recently announced another partnership, with toy retailing giant Toys R Us.

By combining its own faltering toys retail unit with the equally troubled toysrus.com venture, the two firms hope to take on rival toysmart.com.

Some investors and Wall Street analysts worry whether the company will reach profitability before the company runs out of money.

Amazon says it has plenty of cash to see it through.

Amazon's stock, however, is still in the doldrum. Since the start of the year, its share price has fallen steadily from a $113 peak to about $39, with little sign of recovery.

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