Amazon mulls virtual shopping mall

By Sachi Izumi





TOKYO: The Japanese unit of
Amazon.com Inc.

said on Wednesday it was considering launching a

virtual shopping

mall, in a bid to snatch a share of the growing market from Web mall

operators Rakuten Inc. and Yahoo Japan Corp.






The Yomiuri daily earlier reported that Amazon Japan, which currently sells
goods directly to consumers via its Web site, planned to start a virtual mall

later this year to allow retailers to sell products such as clothes and food on

its site.






Shares in Rakuten, operator of Japan's biggest Web-based shopping mall, and
Yahoo Japan both dropped nearly 8 percent by the close, against a 0.8 percent

fall in the broader market.






Rakuten currently holds a 43 percent share of Japan's $4 billion virtual mall
market, followed by Yahoo Japan's 17 percent, according to research firm Fuji

Keizai Management. Fuji expects the market to grow by 47 percent in the next two

years.






Web-based shopping malls generate nearly 40 percent of total sales done on the
Internet or on mobile phones in Japan.






Amazon Japan also aims to mirror the success of its U.S. parent, which has been
operating a virtual mall on its Web site since November 2002, offering products

from other retailers ranging from clothing and kitchenware to electronics.






The virtual mall now accounts for about 30 percent of the products sold on
Amazon.com's Web site, a spokeswoman at the Japan unit said.






The spokeswoman said no details on its virtual mall had been decided, including
launch timing. The company's president Jasper Cheung is scheduled to hold a

briefing on a new business on Aug. 3, but she said this would not be about a

virtual mall.






Ichiyoshi Research Institute analyst Hiroshi Naya said he did not expect
Amazon's entry to have an immediate impact on its rivals.






"Unless they build up a competitive business model with somewhat strict
operational rules and policies that allow them to become profitable, it will be

difficult to grow big enough to shake rivals," he said.






"Since they are launching a virtual mall later than others, they cannot be a
threat just by entering," he added. "There are merits for being in the market

first."






Amazon Japan has been in business since November 2000 and produced about 10
percent of the U.S. parent's group sales in 2005.






The U.S. firm has faced slowing sales growth due to intense competition, while
increased spending on technology and content has crimped profits.






Amazon.com on Tuesday reported a 58 percent drop in quarterly net income and cut
its earnings outlook for the year because of stepped-up investment in its toy

business and lower prices on many products.






Shares in Rakuten closed down 7.6 percent at 49,900 yen, while while Yahoo Japan
also ended down 7.6 percent at 46,200 yen. The Nikkei average was down 0.81

percent.






(Additional reporting by Nathan Layne)