Last week, the six-month-old service’s profile received a big boost after eBay announced it was buying its parent company, GSI Commerce, for $2.4 billion.

As part of the acquisition, eBay plans to spin off a few of the company’s properties to create a well-funded entity.

The spin-off includes ShopRunner, GSI’s licensed sports merchandise business, and Rue La La, a flash sales site. EBay, which is retaining a 30 percent stake in the new entity, is also loaning it nearly $500 million in capital.

ShopRunner, which is headquartered along with GSI outside Philadelphia in King of Prussia, is positioning itself as a defensive play for retailers that are competing against the Amazonian e-commerce giant.

Amazon Prime members pay $79 a year for free two-day shipping on all orders, and more recently, Prime added additional perks, such as free access to 5,000 streaming movies. Similarly, consumers pay ShopRunner $79 for free two-day shipping, but it works across a number of retailers, such as Borders, Barnes & Noble, Toys R Us, Drugstore.com, PetSmart and 40 sites in all.

Mike Golden, ShopRunner president and co-founder of GSI Commerce, says the service is super relevant today as retailers try to defend themselves against Amazon’s increasing dominance.

Not only is it growing its market share online, but it is also becoming a threat in physical stores. He said consumers are increasingly looking at brick-and-mortar stores as showcases, where they can touch and feel products, but then use their smartphones to comparison shop and buy online.

With free two-day shipping, Prime has become the modern day loyalty program.

But it’s unclear how successful Amazon’s so-called Prime service has been since launching in 2005.

Golden claims he’s done his homework and believes it is one of the smartest moves by the Seattle-based retailer to date. And by tracking what analysts have said and by conducting focus groups with dozens of Amazon’s Prime customers, he feels he has a fairly good handle on how well Amazon is doing.

Amazon does not release data on Amazon’s Prime service, and a spokesperson did not return a request for comment.

So, with that in mind, here’s a bullet point list of Golden’s estimates, which he considers conservative:

• In nine purchases out of ten, a Prime consumer would have already qualified for free shipping because their order was above $25. Now, Amazon is collecting $79 a year and all they had to do was upgrade one out of 10 shipments.
• Out of the 25 million items Amazon sells, he believes only 30 percent are eligible for Prime (the item has to be stored in Amazon’s own warehouses to qualify). That means Amazon has an impressive seven to 10 million products that are eligible.
• There are at least five million Prime users in the U.S.
• After joining Prime, users spend two to three times more.
• Prime members were already some of Amazon’s best customers, who were spending on average $600 a year. With Prime, that goes up to $1,200 to $1,800.
• In total, Prime members spend roughly $7.5 billion annually.
• 88 percent of Prime members start their shopping experience on Amazon, rather than any other portal, like Google.

Golden said the three attributes that have made Amazon successful are: having a huge assortment of products, having a huge reach in terms of customers and being a place where people shop frequently. ”We don’t think there’s any other retailer that has the strength to replicate the value proposition that Prime has,” he said. “How do you compete with Prime? You have to have a stronger value prop, not a weaker one, and all we’ve seen launch so far has been weaker and has failed.”

Other stores have tried one-off super saver shipping programs, including Sears, William Sonoma, Walmart and Overstock.

He said what they needed was a coalition.

While Golden was generously willing to share what he knew about Amazon’s Prime program, he was fairly mum about how ShopRunner’s math pencils out. Of course…

But roughly speaking, he said the membership fees consumers pay, along with the cost of two-day shipping, is split among the retailers and ShopRunner, which is then compensated for managing the program.

This week, ShopRunner launched a Marketplace where members can visit one location to search for products they want. This way, they don’t have to memorize which retailers are associated with the program. When searching for watches, you’ll see results from Toys R Us, Drugstore.com, Calvin Klein, Sports Authority and Lord & Taylor. Once an item is clicked on, the user is redirected to that retailer’s Web site to complete the transaction.

Next month, ShopRunner will roll out an iPhone application that allows people to search for merchandise in the store, but ultimately buy from one of the participating retailers online.

He said ShopRunner has more than five million items available overall. When they launch an additional 40 retailers soon, it will have 10 million items, which is getting close to Amazon’s scale.

Golden said the lines between brick and mortar and e-commerce are blurring. It’s no longer a weakness to have low inventory in a story if you can steer users to your online site, where they can get free shipping. A mobile application can help with that–and no longer be considered a threat.

“By using ShopRunner along with smart use of leveraging your store footprints and your e-commerce and distribution centers, they have a better chance of not making it a weakness or a threat, but a competitive advantage,” Golden said.

The program, called ShopRunner, will cost $79 per year—the same as the Prime shipping program offered by the largest online-only retailer Amazon.com Inc. (AMZN).

Participants include many existing GSI Commerce e-commerce service clients such as Toys “R” Us Inc. and GNC Corp. In the coming weeks, outside retailers such as Borders Group Inc. (BGP), Barnes & Noble Inc. (BKS) and Drugstore.com (DSCM) will also join ShopRunner.

“If it wasn’t for the scale, these retailers were likely to have done something like this on their own,” said Mike Golden, president of Shop Runner Inc., which is wholly owned by GSI Commerce. He declined to say how much the companies were paying to participate in the program, but GSI is spending about $5 million this year to launch ShopRunner.

Read the rest of this post on the original site

But it will come at a price: The device, shown below (click on image to enlarge), will retail in December for $399. That’s $100 more than the current price of Amazon’s Kindle 2. And that price point is almost certain to drop in coming months.

Sony wouldn’t let reporters handle the Daily, and didn’t put it through its paces, either. So hard to get a sense of much here. But here’s a video I shot of Sony exec Steve Haber holding the machine while talking up its virtues — which include free access to books from your public library.

EXTRA, EXTRA: SONY’S DAILY EDITION ROUNDS OUT NEW LINE OF DIGITAL READERS

Wireless 3G Reader Extends Sony’s Commitment to Bring
Open Digital Reading to Mass Audience

NEW YORK, August 25, 2009 Delivering on its promise to give consumers a variety of choices, Sony today announced the third member of its new Reader family–the Reader Daily Edition™, a highly-anticipated wireless model with 3G connectivity. The Daily Edition caps its new line of Reader products, joining the Reader Pocket Edition™ and the Reader Touch Edition™ which were announced earlier this month.
The Reader Pocket Edition and the Reader Touch Edition are available immediately, and the Reader Daily Edition will be available this December in time for the holidays at SonyStyle stores and SonyStyle.com.
“We firmly believe consumers should have choice in every aspect of their digital reading experience,” said Steve Haber, president of Sony’s Digital Reading Business Division. “Today, we take another large stride to deliver on that promise. We now have the most affordable devices on the market, the greatest access to free and affordable eBooks through The eBook Store from Sony and our affiliated ecosystem, and now round out our Reader offering with a wireless device that lets consumer purchase and download content on the go.”
A Family of Three Readers
The Reader Pocket Edition sports a five-inch electronic paper display packaged in a stylish chassis and is available in a variety of colors, including navy blue, rose and silver. It is available for the ground-breaking price of $199, making it the most affordable dedicated reading device on the market.
The Reader Touch Edition features a responsive, menu-driven six-inch touch screen panel that enables quick, intuitive navigation, page turning, highlighting and note taking with the swipe of a finger or by using the included stylus pen. It comes in red, black or silver and retails for about $299.
The Reader Daily Edition gives consumers wireless access via AT&T’s 3G mobile broadband network to Sony’s eBook store from just about anywhere in the U.S. Book lovers will be able to browse, purchase and download books as well as select newspapers and magazines when and where they want. There are no monthly fees or transaction charges for the basic wireless connectivity and users still have the option to side load personal documents or content from other compatible sites via USB.
The seven-inch wide, touch screen display provides for intuitive navigation and comfortable layout of content, including newspapers and magazines, whether you’re reading in portrait or landscape orientation. In portrait mode, about 30-35 lines of text are visible, making the experience very similar to that of a printed paperback book. A high contrast ratio with 16 levels of grayscale ensures that text and images are crisp and easy to read. The Daily Edition also boasts an attractive aluminum body with an integrated cover for durability. It has enough internal memory to hold more than one thousand standard eBooks and expansion slots for memory cards to hold even more. It will sell for about $399.
All three models feature Sony’s award-winning industrial design and an E Ink® Vizplex™ electronic paper display that emulates the look of ink on paper. Sony’s eBook Library software 3.0, which now includes support for many Apple® Macintosh® computers as well as PCs, makes it easy to transfer and read any Adobe® PDF (with reflow capability), EPUB, Microsoft® Word®, BBeB® files, or other text file formats on the Reader.
Access to Even More Content at the eBook Store by Sony
In addition to announcing a new family of Readers, Sony has also made several changes and improvements to its eBook Store to provide better access to an even greater variety of ebooks. Earlier this summer Sony announced the availability of more than one million free public domain books from Google, and the company made new releases and New York Times bestseller titles available for $9.99.
Today also marks the launch of Sony’s Library Finder application. Sony, working with OverDrive (www.overdrive.com), the leading global digital distributor of eBooks and to libraries, will now offer visitors to the eBook Store by Sony easy access to their local library’s collection of eBooks. Thousands of libraries in the OverDrive network offer eBooks optimized for the Sony Reader, and visitors can now find these libraries by typing their zip code into the Library Finder. Through the selected library’s download website, visitors can check out eBooks with a valid library card, download them to a PC and transfer to their Reader. At the end of the library’s lending period, eBooks simply expire, so there are never any late fees.
The Reader Pocket and Touch Editions, as well as available accessories such as AC adaptors, cases and covers with reading lights, are available now at SonyStyle.com and SonyStyle stores. Book lovers interested in trying out a Reader in person will also be able to find them for sale at Best Buy, BJs, Borders, Sam’s Club, Staples, Target, Toys“R”Us, Wal-Mart and other authorized retailers nationwide.

DIGITAL READING ECOSYSTEM EXPANDS FOR SONY’S READER

NEW YORK, August 25, 2009 Further evidence of the broad support for its open approach to digital reading, Sony today announced relationships with a variety of traditional and digital publishers who provide content in industry standard formats to create a universe of reading material compatible with the Reader.
All of these sites will offer content in the EPUB format, the International Digital Publishing Forum’s (IDPF) XML-based standard format for reflowable digital books and publications. EPUB has gained acceptance among major trade book publishers with dozens of publishers already producing the majority of their eBooks using the standard. Sony recently announced that the company is transitioning its entire content library to the EPUB format, giving consumers the freedom to purchase or download free eBooks from the eBook Store by Sony and read them on any EPUB-compatible device.
“From the beginning, we have said that an open format means more choice for consumers,” said Steve Haber, president of Sony’s Digital Reading Business Division. “Now, working with other industry leaders, we can provide a device that is compatible with the widest selection of content available. Readers can shop around for what interests them rather than be locked into one store.”
Sony’s eBook Store already provides access to more than one million public domain Google Books in EPUB format and, starting today, Sony’s Library Finder application will go live. Library Finder offers visitors to the eBook Store by Sony easy access to their local library’s collection of eBooks. Thousands of libraries offer eBooks optimized for the Sony Reader, and visitors can now find these libraries by typing their zip code into the Library Finder. Through the selected library’s download website, visitors can check out eBooks with a valid library card, download them to a PC and transfer to their Reader.
Other sites offering EPUB content include:
• Independent Bookstores–More than 200 participating members of the American Booksellers Association–including stores such as Tattered Cover (Denver, CO) and Vroman’s Bookstore (Pasadena, CA)–will have the ability to sell e-content to consumers beginning this fall. The stores using ABA’s IndieCommerce platform will offer content in the EPUB format and protected by Adobe’s Content Server 4 (ACS4) digital rights management, which is compatible with Sony e-Reader products. In addition, plans are underway to make Sony’s e-Reader devices available for purchase from independent bookstores in time for this holiday season. ABA is a not-for-profit trade organization devoted to meeting the needs of its core members–independently owned bookstores with storefront locations–through education, information dissemination, business products and services, and advocacy.
·        BooksOnBoard–BooksOnBoard, the largest independent eBook bookseller and member of both the ABA and IDPF, has been a staunch supporter of the EPUB standard through its founder Bob Livolsi. BooksOnBoard was the first eBook site to offer the EPUB standard to its burgeoning customer base and has sold more EPUB formatted books than any other online bookstore. BooksOnBoard believes that the EPUB standard significantly benefits the publisher, authors and most importantly the consumer.
·        NetGalley–NetGalley is an innovative and easy-to-use online service and connection point for book publishers, reviewers, media, librarians, booksellers, bloggers and educators. NetGalley delivers digital galleys and promotional materials to professional readers and helps promote new and upcoming titles. Starting today, NetGalley will support the Reader with the ability to download a protected PDF file and this fall the company will offer digital galleys in EPUB format.
• Powell’s Books and Powells.com–Powell’s Books is the largest independent bookseller in the world.  Innovative since its inception in 1971, it was one of the first booksellers online (beginning in 1994), and one of the first to sell eBooks for reading devices (the Rocket eBook) in 1999. Powell’s offers EPUB content for a wide range of compatible devices, including the Sony line.  Powell’s is an important player in the open access world of eBooks, where titles are provided by a wide range of publishers in a competitive retail environment, read on a range of devices, and downloaded and owned by millions of people around the world.

Amazon (AMZN) hasn’t yet commented on the settlement beyond the filing, which offers little more information than that it was “unanticipated” and will be charged to “other operating expense” in the second quarter.

Credit Suisse analyst Gary Balter explained in a research note today that one reason he has maintained an Outperform rating on GME shares is that the company has dominated the used videogame business; he notes that used games generate 44 percent of the retailer’s gross profits, nearly twice the segment’s sales contribution to the company. Over the last several days, he reports, there have been two attacks on the company’s near monopoly in used games.

On Tuesday, Forbes reported that Toys ’R Us has a pilot program to test the sale of used games in some of its U.S. stores; Forbes noted that the program was first reported in the user forums of a Web site called cheapassgamer.com. Other retailers, including Best Buy (BBY) and Blockbuster (BBI), have previously experimented in the segment, but haven’t made much of a dent.

Read the rest of this post