Analyst Vern Keenan, principal of Keenan Vision, says dealing in travel will let Amazon profit from an intangible good the company doesn't have to fulfill itself. Keenan acknowledges that the timing of the travel store launch is unfortunate, but that Amazon probably didn't have many options. "It just sounds like they went ahead with a deal they already had in place," he says.
An Amazon spokeswoman says the company planned to build a travel presence for some time, and that Expedia--which possesses the back-end know-how needed to make a retail travel site work, as well as exhaustive connections to travel service providers and information resources--emerged as a logical partner because of its strong brand and its nearby location. Both companies are based in Seattle. The spokeswoman also says the travel store, the sixth store launched this year, is viewed as a key property in Amazon's attempts to reach profitability regardless of the industry's current woes. "Unfortunately, it had to come at a bad time, but travel still plays a big role in people's lives," the spokeswoman says.
Terms of the partnership aren't being disclosed, but the spokeswoman says the relationship is similar to those Amazon has with other store partners, including Toys "R" Us, Drugstore.com, Carsdirect.com, and BabiesRUs.com. Keenan suspects the arrangement works like this: Expedia pays a set fee for Amazon to cover sales up to a certain amount, and Amazon would receive a percentage of any sales beyond that figure. He says forming such partnerships to leverage significant brands without having to make major technology investments is a model that serves Amazon well.