Amazon aims to make change with Coinstar

Partnership: The online retailer sees money to be made by turning the counting machines' nickels, dimes and quarters into gift certificates.

September 14, 2005|By Julie Tamaki | Julie Tamaki,LOS ANGELES TIMES

Amazon.com Inc. sees gold in nickels, dimes and pennies.

Hoping to scrounge market share from America's couch cushions, the world's biggest online retailer announced yesterday a partnership to offer Amazon gift certificates at thousands of change-counting machines operated by Coinstar Inc.

The deal allows Coinstar customers to receive an instant Amazon gift certificate for the amount of change they dump into a green Coinstar machine, eliminating the 8.9 percent service fee.

Key for Amazon is access to millions of adults and kids who can't buy online because they don't have a credit card.

The lucrative youth market, which by one count spends about $175 billion annually, isparticularly appealing to Amazon. A Coinstar survey found that 7 percent of teens have credit cards.

The deal highlights Amazon's efforts to compete against retailers with physical stores.

Although Amazon accepts payment by check, the process can be cumbersome and time consuming. It does not accept cash, which makes it tougher for teens to spend their allowance at Amazon the way they can at the mall. Amazon's partnership with Coinstar gives the online retailer a way to reach into teens' pockets, but it might lack the instant gratification sought by some.

"I think this is a really good partnership, but I don't think it's going to fundamentally replace the store environment for people who have cash," said Patti Freeman Evans, a retail analyst with Jupiter Research. "The store environment is immediate. You can buy it and get it today. Amazon is really fast, but it's a different process."

Coinstar is purchasing the gift certificates, consisting of a redemption code printed on a transaction receipt, from Amazon at a discounted rate, allowing Coinstar to offer them to customers without a service fee.

But customers could face shipping fees to receive the goods they purchase over the Internet when they redeem their gift certificates on Amazon.

Coinstar has struck similar arrangements with Starbucks Corp., Pier 1 Imports Inc., Hollywood Video and Linens `n' Things Inc., in which Coinstar customers exchange their change at certain machines for gift cards they can use to purchase the retailers' products.

Coinstar Vice President Peter Rowan suggested that potential sales were great. The United States, he said, has an estimated $10.5 billion in loose change jingling around. That's nearly $4 billion more than Amazon's sales last year.

"Americans are notorious coin hoarders," Rowan said.

The Los Angeles Times is a Tribune Publishing newspaper.

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