Amazon-Toysrus.com deal signals strategy shift

The e-tail giant Thursday formed a 10-year partnership with Toysrus.com to develop a new co-branded e-commerce site for toys and video games. Amazon, which sells toys as well as books, CDs and kitchenware on its site, said it also plans to create a co-branded baby-products site with Toysrus.com. As part of the agreement,Toysrus.com, in conjunction with its majority shareholder, Paramus, N.J.-based Toys "R" Us, will handle the buying and management of inventory. Amazon will handle Web site development, order fulfillment and customer service for the new site. Both companies said they intend to house each other's inventory in Amazon's U.S. distribution centers. Today's agreement represents a fundamental shift in Amazon's strategy, with the e-tailing giant handing off much of the inventory risk to Toysrus.com while continuing to focus on its strength in drawing customers. "It is certainly the case that while we aspire to have the merchandising skills of a Toys 'R' Us, it would be foolish to believe we have them today," Amazon chief executive Jeff Bezos said at a news conference in New York. "As we enter new product categories, there's a learning curve--not a bad thing --but it can be very expensive," Bezos added. He also said his Seattle-based company is open to similar alliances for other product categories.