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Amazon.com, Toysrus.com Unite

Amazon.com and Toysrus.com Thursday teamed to create a new online store offering a variety of toys and video games.

Once the new toy and video store is up and running at Amazon.com in the fall, the Toysrus.com site will serve as a gateway that redirects users to the new outlet's location.

Additionally, Amazon.com and Toysrus.com will extend the success of the recently launched Babiesrus.com with the debut of a co-branded baby products store during the first half of 2001.

The alliance unites two leading retailers -- one in brick-and-mortar retailing, one in e-commerce -- to create a better online shopping experience, noted Jeff Bezos, Amazon.com founder and chief executive officer.

"This is a huge win for our customers," said Bezos. "Our existing toys and games business has grown rapidly because customers appreciate our passionate focus on selection and customer experience.

By joining with Toys "R" Us, we're bringing customers an even greater and more diverse product selection and teaming up with a leading resource for toys, games and baby products," he said.

Each company will assume responsibility for specific aspects of the toy and video games and baby products stores. Toysrus.com will identify, buy and manage inventory; Amazon.com will handle site development, order fulfillment and customer service, housing both Toysrus.com's and its own inventory in Amazon.com's U.S. distribution centers.

Amazon.com will be compensated through a combination of periodic fixed payments, per unit payments and single-digit percentage of revenue. The specific amounts of the payments were not disclosed.

It's a nice, complementary deal, according to Forrester senior analyst Seema Williams.

"Amazon does not do all that well selling toys, Toys R Us doesn't do that well selling online. It's definitely solving the biggest problems both of them have."

Williams added that a 10-year deal is "very uncommon, particularly in a Web environment, where most agreements do not exceed two years.

The agreement allows for global expansion of the arrangement.

Amazon.com will also receive warrants entitling it to acquire 5 percent of Toysrus.com.

All parties will market the co-branded store to their respective customers.

According to Media Metrix, a source of Internet and digital media measurement, toysrus.com was the number-one-ranked online toy site for April and May 2000.

Amazon already has partnerships with online retailers such as Drugstore.com Inc. , HomeGrocer.com Inc. and Pets.com Inc. .

Amazon said last week that most of the revenue booked through its network of such Internet partners came in the form of stock in those companies.