The Japanese unit of Amazon.com Inc. said on Wednesday it was considering launching a virtual shopping mall, in a bid to snatch a share of the growing market from Web mall operators Rakuten Inc. and Yahoo Japan Corp.
The Yomiuri daily earlier reported that Amazon Japan, which currently sells goods directly to consumers via its Web site, planned to start a virtual mall later this year to allow retailers to sell products such as clothes and food on its site.
Shares in Rakuten, operator of Japan's biggest Web-based shopping mall, and Yahoo Japan both dropped nearly 8 percent by the close, against a 0.8 percent fall in the broader market.
Japan's $4 billion virtual mall market is expected to grow by 47 percent in the next two years, according to Fuji Keizai Management. Web-based shopping malls generate nearly 40 percent of total sales done on the Internet or on mobile phones in Japan.
The paper said an entry into the market by Amazon Japan which boasts over 6 million users a year could likely spur a shift in sites consumers use to shop online.
Rakuten currently holds a 43 percent share of Japan's virtual mall market, followed by Yahoo Japan with 17 percent.
Amazon Japan aims to mirror the success of its U.S. parent, which has been operating a virtual mall on its Web site since November 2002, offering products from other retailers ranging from clothing and kitchenware to electronics.
The virtual mall now accounts for about 30 percent of the products sold on Amazon.com's Web site, a spokeswoman at the Japan unit said.
The spokeswoman said no details on its virtual mall had been decided, including launch timing. The company's president Jasper Cheung is scheduled to hold a briefing on a new business on August 3, but she said this would not be about a virtual mall.
Ichiyoshi Research Institute analyst Hiroshi Naya said he did not expect Amazon's move into the market to have an immediate impact on its rivals.
Unless they build up a competitive business model with somewhat strict operational rules and policies that allow them to become profitable, it will be difficult to grow big enough to shake rivals, he said.
Since they are launching a virtual mall later than others, they cannot be a threat just by entering, he added. There are merits for being in the market first.
Amazon Japan has been in business since November 2000 and produced about 10 percent of the U.S. parent's group sales in 2005.
The U.S. firm has faced slowing sales growth due to intense competition, while increased spending on technology and content has crimped profits.
(Additional reporting by Nathan Layne)