Amazon Expands in Chase for Profits

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Internet retailer will start selling personal computers in the second half of this year and will build a bookstore for schools and institutions by year's end.

Amazon will go ahead with the expansion even though the offline market for PCs is hardscrabble, David Risher, Amazon's senior vice president of marketing and merchandising, told analysts in a conference call yesterday.

"It's a rough, rough business," Risher said. "It's not growing in the physical world, but online it's growing quite nicely."

PC sales in brick-and-mortar stores for the first two months of this year dropped 23 percent, while online sales were up 77 percent.

While it offered no sales projections for PCs, Amazon said its bookstore for schools and institutions is expected to become a $150 million business in the next two years.

Both the new bookstore and the move into PCs are part of an Amazon effort to sell more products to existing customers and to boost the frequency of orders.

But it will not be easy for Internet retail's poster child, which is now under pressure from Wall Street to produce profits. Intense competition and heavy discounting have shaved margins on PCs.

Still, Amazon is unfazed.

Risher said PCs would bolster sales of electronic items at Amazon such as digital cameras and computer accessories.

Electronics and books are among the top-selling categories on its site.

"Not only do we like PCs as a business in itself, but we like what it does for our electronic business as well," Risher said.


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