By Elizabeth Rigby in London
Published: 19 April 2005
Marks and Spencer on Monday signed up Amazon to develop and run its internet operation as it acknowledged that it had fallen behind competitors in the race to grab a piece of the fast-growing online market. M&S currently sells clothes and homeware online. However, with 24m hits a year, the website has huge reach and it is thought M&S may start selling food online in the longer-term.
Last December, the M&S website crashed when the technology could not cope in an upsurge in demand sparked by a special sales day. Stuart Rose, chief executive, said: "Frankly, we ought to be better at it than we are. We are going to have to invest money in it for more functionality and we decided to use somebody else rather that do it on our own."
Under the terms of the deal - neither side would disclose financial details - Amazon Services Europe will provide the technology behind M&S's website, in-store and telephone ordering and customer services systems. M&S will still manage site content, customer services operations, warehousing and distribution.
M&S yesterday declined to comment on how much the deal was worth, saying only that the retailer would pay an up-front cost and then a service charge every year. Typically in such a deal, the service provider will take a 20 per cent cut of all revenue generated. However, M&S is understood to have negotiated far more favourable terms.
The deal is significant for Amazon, which is trying to build-up its services business in the UK. In the US, Amazon runs e-commerce operations for a number of retailers, including Target and Borders, while in the UK it has signed a deal with Waterstones.
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