By  on January 4, 2007

Add Amazon to the list of companies aiming to tap into the growth of accessories.

The Web giant on Wednesday opened its second online store, Endless.com, which sells footwear and accessories. The site offers more than 250 brands, all bought by Amazon staff, and free overnight delivery. The site is the company's attempt to compete with the likes of Zappos, Gap's PiperLime and Nordstrom.

Most of the shoes retail for less than $100 and brands include Adidas, Kenneth Cole, Aerosoles, Jessica Simpson, Geox, Hush Puppies, Easy Spirit, Steve Madden, Enzo Angiolini, Birkenstock, farylrobin, BCBG Max Azria, Anne Klein New York, Rockport and Fila.

The new venture comes at a time of explosive growth in Web shopping. Online spending during the holiday season rose 26 percent over the same period in 2005, to $23.1 billion, according to comScore.

And industry observers said the footwear and accessories category was big enough for lots of e-tailers, just like the offline world. "I wouldn't be surprised if there's an opportunity to segment this market better," said Paul Keung, a financial analyst with CIBC World Markets bank.

He estimated Amazon's apparel and accessories business to be somewhere in the hundreds of millions of dollars. If done right, the new store has the potential to add incremental value to the company's $8.4 billion business, he said.

The company may have needed a new brand and customer interface to keep up with competitors such as Zappos, which projects 2006 sales of $600 million. "[Shopping] behavior often differs by category and type of shopper," said Keung. "I don't think one size fits all."

Amazon developed a new look and feel for Endless.com rather than simply reusing Amazon's existing interface, which initially was developed to sell books.

Amazon has sold apparel, shoes and accessories from other retailers at its Web store since 2002. In 2004, the company added its own inventory at amazon.com. Last year, Amazon acquired online contemporary boutique Shopbop. But this is the first time the company has developed and opened an online store with a separate URL and brand name, since Amazon.com was launched in 1995."From our perspective, it's a big market, and the more people become comfortable shopping online, the better it is for all players," said Tony Hsieh, chief executive officer of Zappos, based in Henderson, Nev.

"I think just as there are many different shoe stores, there can be many different online shoe retailers," said Dana Telsey, founder of research firm Telsey Advisory Group. "Consumers can become comfortable with different service, different products and different experiences, and they all allow different companies to gain market share."

Feedback from existing apparel customers inspired Amazon to create Endless.com. "They like to shop differently," said Amazon's Steven Goldsmith, vice president of soft lines at Amazon and Endless.com.

The more than 250 brands and 15,000 styles and colors on Endless.com mirror what is already on sale at Amazon.com, he said. In addition, customers in all 50 states will get free overnight delivery and free return shipping indefinitely, 24-hour-a-day telephone customer service, and can return any item for up to a year as long as it is unworn.

Navigation and search has been streamlined, and customers can search by price, style, brand, size and color, at the same time or separately. The site will have customer product reviews and will add fit guidelines for individual manufacturers. There are no plans to add other Amazon features such as lists.

Each shoe is photographed from seven angles, can be viewed with a magnifying glass feature and editors write detailed product reviews with the item in hand.

The Endless.com team is based in Seattle, but Goldsmith would not reveal its size or revenue expectations. Customer service people are specially trained for Endless.com and work out of Amazon's existing centers around the country.

Analysts said Amazon may have decided to open an accessories store because of the potentially high margins and growth.

"One reason it's attractive to them is potentially high-margin business and one in which you've seen success with Zappos, PiperLime and Nordstrom," said Keung. "And the offline retailers will tell you the designer handbag and women shoes and accessories business also does very well."

"What we've been seeing and what these companies are finding is, there's still growth potential in online sales," said Patti Freeman Evans, a retail analyst for JupiterResearch. "Apparel and accessories will be the largest online category, overtaking computers in a couple of years."And there is clearly plenty of room for growth — only about 5 percent of apparel is sold online currently, versus 45 percent of computers. Jupiter is projecting total online sales, excluding travel, to reach $100 billion in 2006. Of that, apparel and accessories are projected to be $2.25 billion and footwear, $2.30 billion. They are the 14th and 15th largest categories, after computers, books, music.

"I think there's room still online for lots of competition, which is clearly what's beginning to happen, at least in the footwear industry. The business will also get more competitive online as the online community continues to mature," she said.

Free shipping is sustainable as long as the retailer builds it into the business model, she added. "They're trying to one-up, certainly Zappos, from a service perspective, at least initially."

Zappos' strength has been its selection (more than 500 brands and 90,000 styles) and service, including free shipping both ways. But others could easily copy its large selection, said Keung.

As for the relatively low marks apparel gets in customer satisfaction (see list, facing page), Freeman Evans said apparel has some inherent issues such as fit, size and color that make it more complex than selling computers.

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