In its second-largest acquisition, Amazon buys the company for $970 million.
A month after Buy.com announced it would offer free shipping on most products and price its books 10% below Amazon.com, total sales at the online retailer are up 25%.
A month after Buy.com announced it would offer free shipping on most products and price its books 10% below Amazon.com, total sales at the online retailer are up 25%. The company had been doing about $1 million per day in sales prior to the announcements in late June and daily sales are now running between $1.2 million and $1.3 million, Scott Blum, Buy.com founder and CEO, tells Internet Retailer. Book sales alone, which skyrocketed by 800% during the first week, were up 500% for the month, he says. Publicity about the book pricing deals also spurred sales of Buy.com’s electronics and other items, he says.
Although some critics say Buy.com can’t afford to sustain the price cut, Blum says it is no problem. “We were always about 10% on average below Amazon,” he says. “It’s just that some books were priced as much as 16% below Amazon while we were even a little higher than Amazon on others. By pricing a consistent 10% below, we could promote the fact and still not see a decline in profitability.”
Blum claims he can charge less than Amazon because his costs are less. While Amazon stocks many of its books in its own warehouses and provides most of its own order fulfillment, Buy.com relies on Ingram Publishing, an experienced book distributor, to carry the inventory and uses outside order fulfillment firms.
While critics claim relying on outsiders puts a retailer in jeopardy of not having products in inventory when the customer wants them, Blum says that is not so. He claims a 97% success rate in shipping the same day as the order was received.
Some analysts have downplayed Buy.com’s moves. In a recent research report, Sasha Rashtchy, an analyst with US Bancorp Piper Jaffray, described the Buy.com move as “over-blown” and said the move shouldn’t hurt Amazon. Surprisingly, Blum agrees with much of that. However, he says his interest is not in destroying Amazon, but in gaining market share. “Amazon is eight times the size of us. Amazon probably lost about 2% of its market share to us, which is no big deal to Amazon, but is a real big deal to us,” he says.