Amazon Gets Third Party Started

"I think it's a long-term factor," says Scott Devitt, an analyst at Legg Mason, which has no underwriting relationship with Amazon but owns a stake in it. "Amazon hasn't made it easy to get your hands around the specifics, but it appears to be a sustainable area."

When Amazon reported first-quarter earnings, it announced a string of major retailers that had signed up for its Merchant.com program, including Target(TGT Quote), Macy's, Diane von Furstenberg, bebe (BEBE Quote) and Marks & Spencer.

At that time Bezos said, "We are seeing, as you can see from the recent announcements that we have been making, very strong interest in building private-label, e-commerce Web sites for other merchants who want to have an Amazon.com-like experience for their customers.

"We are offering not only the Web site, but we are also finding the people who are interested in having fulfillment and customer-service applications, too," the CEO said.

CFO Tom Szkutak added, "As people start to build e-commerce businesses of any scale, they find that scaling those businesses and making them operate at scale is much harder than when it is being done at very small scale. And so that may be one of the structural things that you are seeing in the recent announcements."

Amazon's stock tanked after its first-quarter earnings because of weaker operating margins, but contrarians who had been listening closely would have spied a buying opportunity. In the second quarter, it was new business from Merchants@ and Merchants.com that more than anything revived Amazon's margins.

Amazon's second-quarter operating profit rose 31%, above the 24% growth in revenue. Deutsche Bank analyst Jeetil Patel calculated a 3% increase in operating profit per unit in what is seasonally a slow quarter. Deutsche Bank says it intends to receive or seek investment-banking compensation from Amazon.