December 26, 2000, 9:55 AM

Is Amazon paddling toward a profit?

Don Davis

Editor in Chief

Amazon.com still hasn’t shown Wall Street the money-in fact, its 1999 fourth-quarter loss reached a wider-than-ever $185 million. But the Web’s sales and traffic leader has begun offering a preview of profitability via recent alliances with Drugstore.com and Living.com.

Amazon increased its investments in both companies in exchange for giving the sites shopping tabs that could fetch as much as $100 million a year at margins approaching 80%, analysts estimate. The latest deals join partnerships with Pets.com, HomeGrocer.com, sporting goods retailer Gear.com, and same-day delivery service Kosmo.com. “Amazon is is building up its portfolio as well as its investing group, so that these companies can share resources and knowledge,” says Matt Stamski, an analyst at Gomez Advisors, Lincoln, Mass.

With its stakes in Kosmo and HomeGrocer, according to Stamski, Amazon is investing in news ways to reach Internet customers by attempting to jump the delivery hurdle. The affiliations also allow Amazon to learn more about complicated categories like furniture and groceries without the expense of entering them on its own.

Time will tell whether Amazon’s continued pursuit of superstore status will pay off. In other signs of fiscal restraint, the company trimmed its 750-member staff by 2%. Amazon says its U.S. book sales showed a profit in the fourth quarter. But its refusal to disclose how much fed speculation that the figure wasn’t high

Keven Wilder, a retail and e-commerce consultant based in Chicago, still likes the sound of Amazon’s strategy. “Customer acquisition costs are so high,” she says, “that once you get a customer to Amazon, why not sell them everything under the sun?”

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