December 1, 1999 6:40 AM PST

Amazon moves upscale with Ashford stake

Amazon.com is going upscale, investing in luxury goods e-tailer Ashford.com.

The two companies said today that Amazon is investing $10 million in cash for a 16.6 percent stake in Ashford.com. In addition, Amazon will help the Houston-based company market its Rolex watches, Montblanc pens and Mondo di Marco ties to Amazon customers.

The $10 million investment represents a considerable discount for Ashford's stock, coming to less than one-tenth the current market value of one-sixth of the company's shares. But the deal could be worth much more than its face value to the luxury goods site, because it allows Ashford to tap into Amazon's 13 million customers, the largest base in e-commerce.

The agreement comes one day after Seattle-based Amazon announced that it expanded its toy offerings in buying Back to Basics Toys, an online and catalog toy retailer. Earlier this month, Amazon bought Tool Crib of the North to launch its new home improvement store. Amazon also owns minority stakes in Drugstore.com, Homegrocer.com, Pets.com, Della & James and Gear.com.

"We're really excited about the alliance," said Ashford.com chief executive Kenny Kurtzman. "It validates the [luxury goods] category and endorses us as the leader."

Kurtzman said that Ashford.com's customers spend an average of $500 on the luxury goods site. If only one percent of Amazon's current customers buy items on Ashford.com because of the deal, those added customers could translate into some $65 million in new revenues for the company, he calculates.

"If we're successful with this, the upside to our business is huge," he said. "We're giving only 16.6 percent of our company to acquire those customers. From our perspective, as a way to grow the business, it's a no-brainer."

Amazon spokesman Paul Capelli said the agreement allows the e-tail giant to offer a greater range of products to its customers. Many have already indicated their interest in luxury goods, he said.

As with the other companies Amazon has invested in, the e-commerce leader will link to Ashford.com from its home page and offer special Ashford promotions.

 

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