• by Ken Liebeskind , May 24, 2002

It’s a jungle out there, and the online megastore has figured out how to put advertising messages in front of consumers. There isn’t any banner or other static advertising at Amazon. Instead of selling online space, the company establishes strategic alliances with companies to co-brand their products. Deals have been made with a number of companies, including Toysrus, Proflowers, Borders Books and Target.

In the deal with Toysrus, the companies agreed to assume responsibility for specific aspects of the store. Toysrus would buy and manage inventory while Amazon would handle site development, order fulfillment and customer service.

In the ten year agreement, Amazon is compensated through periodic fixed payments, per unit payments and single digit percentage of revenue.

“The alliance brings together the highly complimentary strengths of two leading brands and retailers--one in brick and mortar retailing, one in e-commerce,” Amazon said in a release.

The deal with Proflowers gives Amazon customers the ability to purchase flowers through a direct link to the Proflowers site from Amazon. Amazon’s logo appears on the Proflowers site. “They can go back and forth at ease,” according to a Proflowers spokeswoman.

Amazon and Target Corp. announced a five year deal in which a Target store would open at Amazon. Target will also use Amazon’s order fulfillment and customer care services for all its sites, including Target.com, MarshallFields.com, Mervys.com and GiftCatalog.com. The deal benefits both parties, with Target able to sell to everyone at Amazon and Amazon able to offer a wider variety of products.

None of these deals are advertising, they’re merchandising. Instead of selling advertising on its site, Amazon utilizes the site to sell more product. After all, it’s the web’s biggest retailer. It has been struggling with profitability since its inception. An analyst says the alliances create the cash flow needed to support the virtual business model.

A survey participant calls Amazon a household name and says it provides good customer service.

Unique audience: 31.5 million Time per person: 23 minutes 2001 ad revenue, through Sept: Not available