November 25, 2002, 12:00 AM

Mass Merchants: Aggressive and innovative

(Page 2 of 6)

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Buy.com
Buying a new lease on life

F.Scott Fitzgerald said there are no second acts in American life. F. Scott Fitzgerald never met Scott Blum. Near death 18 months ago, Blum’s Buy.com is a contender again. An aggressive free shipping policy, a promise to undercut Amazon’s prices, big ads in the Wall Street Journal, Blum interviewed by Joan Rivers at the Emmys-suddenly Buy is showing every sign of life.

All this activity has resulted in big spikes in sales. Book sales were up 500% and total sales 25% the month after the free shipping offer was announced-and there has been little slippage from those levels, the company says.

And now Buy is taking on a multi-channel approach, with a cable TV show that interviews persons associated with a product-the explanation for why Blum got VIP treatment at the Emmys and on-screen time with Joan Rivers. “Our vision is to demonstrate a powerful model for the future,” Blum says.

The TV idea appeals to analysts. “Buy.com can’t reach out and grab people,” says Ken Cassar, senior analyst for Jupiter Research Inc. “TV can get people’s attention and get them to the web site. It should generate a lot of traffic for Buy.com.” But Cassar also notes that TV is costly and risky. “It’s too early to tell whether the benefits will outweigh the risks,” he says.

Blum certainly thinks they will. “If all goes right, only about 25% of our sales will come from the Internet within three years,” he says.

TV will not make up the remaining 75%; rather, orders will come to a call center, driven there by a “magazine” launched earlier this year. It’s really more of a catalog that features products in an editorial context which browsers can read about, then order by phone.

Blum can be forgiven some smugness as he watches over the resurrection of Buy.com. He took the company public in early 2000, selling 16.1 million shares at $27 each while continuing to hold 40% of the company’s stock. He stayed on the board but was not a huge fan of management’s moves into new products and creation of a corporate structure he felt was bloated. Late last year, he bought the company back at 17 cents a share. He quickly trimmed staff and product, then watched as sinking sales turned around. From a high of $207.6 million in the first quarter of 2000, sales had fallen steadily to $94.9 million in Q2 2001. Sales appeared to have settled at $1 million a day earlier this year, before jumping to $1.4 million a day over the summer.

If that trend keeps up, Blum will have a winner on his hands once again. “I never lost faith in the business model,” he says.

Buy.com

Date
November 1997
Unique Visitors
> 3 milion/mo.
Sales
$38 million (est.)/mo.
Design By
in-house
Site Search
Alta Vista
CRM
N/A
Affiliate Management
LinkShare Corp.
Fulfillment
in-house
Order Management
N/A
Returns Liquidation
in-house
Web Analytics
in-house
Payment Processor
First Data Corp.
Content Management
in-house
E-mail Management
in-house

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eBay
Never satisfied

Like a young lion that suddenly realizes it has bounds of untapped power, eBay Inc.’s eBay.com is prowling for more turf in the retail jungle. And at the rate it’s going , it could easily become king of the jungle by virtue of changing the way consumers buy products. “EBay is the most revolutionary development to come out of the Internet, as far as really changing the business model and making retailing a one-to-one experience,” says Neil Stern, a partner with retail consultants McMillan/Doolittle.

EBay is already hitting some impressive numbers in terms of sales transactions in several product categories: $3 billion in used cars; $2.2 billion in computers and electronics; $1.4 billion in home furnishings; and $750 million in each of sports and fashion. “Now we’ll try to go broader and continue to enter new categories,” says Jeff Jordan, senior vice president and general manager of eBay U.S.

Some of its fastest-growing new product categories are home improvement, health-and-beauty, and supplies to vertical small-business markets. Keeping these and other product areas organized in categories is a key to growth, Jordan adds, because it helps build critical mass and makes it easier for shoppers to find what they want.

At the same time, eBay expects to expand in areas where it is already strong. Take the used-car market, which amounts to close to $400 billion a year in the U.S. “Our $3 billion is not even a percentage of that,” Jordan says. “We may be the largest in used car sales, but we have huge opportunities to grow.”

EBay is also gaining momentum in areas it wasn’t initially designed to serve. Significant to both its future sales and image among consumers, Jordan says, is the rapid growth in selling activity by major retailers and manufacturers like The Home Depot Inc., Hewlett-Packard Co. and IBM Corp., which are using eBay to sell overstock items instead of placing them with liquidators. “That adds credibility to our site, because the buyer sees these big brands,” Jordan says.

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