Amazon Japan mulls virtual shopping mall

Tokyo, July 26 | Updated: Jul 27 2006, 05:30am hrs
The Japanese unit of 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 website, 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 Japans biggest web-based shopping mall, and Yahoo Japan both dropped nearly 8% by the close, against a 0.8% fall in the broader market. Rakuten currently holds a 43% share of Japans $4 billion virtual mall market, followed by Yahoo Japans 17%, according to research firm Fuji Keizai Management.

Fuji expects the market to grow by 47% in the next two years. Web-based shopping malls generate nearly 40% of total sales done on the Internet or on mobile phones in Japan.

Amazon Japan also aims to mirror the success of its US parent, which has been operating a virtual mall on its website since November 2002, offering products from other retailers ranging from clothing and kitchenware to electronics. The virtual mall now accounts for about 30% of the products sold on Amazon.coms website, a spokeswoman at the Japan unit said. The spokeswoman said no details on its virtual mall had been decided, including launch timing.

The companys president Jasper Cheung is scheduled to hold a briefing on a new business on August 3, but she said this would not be about a virtual mall. Ichiyoshi Research Institute analyst Hiroshi Naya said he did not expect Amazons 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.