Amazon Outsources Electronics Sales

Further paring its focus to its strong suits of marketing and customer service, Amazon.com (Nasdaq: AMZN) has outsourced part of its electronics fulfillment to Overstock.com.

The agreement calls for Salt Lake City, Utah-based Overstock to fulfill orders for about 700 different items in Amazon’s electronics category.

Amazon will continue to handle order-taking and some other back-room duties, and will receive a percentage of all sales made.

A spokesman for Overstock confirmed that the one-year deal may be expanded to other product categories in the future.

Word of the partnership came the same week that Amazon announced it would begin to sell personal computers on its site for the first time, during the second half of this year. However, there are currently no plans for Overstock to handle that category.

Growth Spurt

Launched in October 1999, Overstock has enjoyed a recent surge in growth and with 4 million regular visitors each month, now draws more traffic to its site than Walmart.com (NYSE: WMT) and Buy.com (Nasdaq: BUYX).

The growth spurt is due in part to the misfortune of other dot-coms, whose surplus merchandise Overstock sells at discounted prices. Overstock also sells the excess inventory of offline and catalog retailers.

Overstock chief executive officer Patrick Byrne said some firms choose Overstock to avoid selling discounted merchandise through their own stores or Web sites.

“The last thing a brand-name company wants to see is their products in a bin at a basement store — or for that matter, in their own store,” Byrne said. “It cheapens their brand and teaches their customers to wait for lower prices.”

Focus on Strengths

For Amazon, the deal mirrors an earlier agreement with Ingram that involves sending books directly to customers.

Analysts reportedly say the deals will help Amazon boost its profit margins by reducing the cost of shipping and handling merchandise, which is often a money-losing proposition for e-tailers.

The partnership gives Overstock.com access to Amazon’s base of 23 million customers, widely viewed as one of Amazon’s most valuable assets in its bid for survival as the e-commerce industry matures.

Overstock has been eager to expand its reach into new product categories as well. In February, Overstock unveiled its own bargain travel section, offering airline travel obtained through a ticket consolidator, as well as discounted hotel stays.