Ted, have you ever thought about going on the Buy.com golf tour?
NEW YORK -- Online retailing underdog Buy.com wants to take a bite out of the book sales of its much bigger rival Amazon.com.
The online seller of books, electronics and computers announced yesterday that it has begun to offer all book titles at 10 percent below Amazon.com's prices, as part of a strategy to win its competitor's customers and capture a greater market share of online book sales.
Amazon.com's shares declined 12.4 percent, or $2.17, to close yesterday at $15.34 on the Nasdaq Stock Market. Says Amazon.com spokeswoman Patty Smith: "We have always focused not on the competition but the customer."
Buy.com's latest move follows a series of price reductions from both online retailers. On June 18, Amazon.com announced that it had reduced its minimum order requirements for free shipping on most items to $49 from $99. Amazon.com plans to test the program for three to six months before deciding whether it will become permanent. That marked Amazon.com's fourth significant price decrease in 11 months.
Buy.com responded the next day with a free shipping offer across all categories with no minimum purchase required.
The privately held Aliso Viejo, Calif.-based company started out in 1996 by selling products below cost and then switched to raising prices, focusing on computers and electronics. It is expected to generate sales of $400 million this year, according to founder Scott Blum, who bought back the company in November 2001 and has made it more cost efficient.
In comparison, analysts expect Amazon.com's revenue to increase more than 15 percent this year from the $3.12 billion it posted in 2001.
With the latest price cut, Buy.com officials want to highlight its strength in books.
"Buy.com is best known for its computer and electronics selection, but what many customers might not realize is that we are a strong destination for books as well," said Blum. "We want consumers to know where the real value is in online book purchases, and enjoy all of the other Buy.com advantages: lower prices, better customer service and better selections."
Blum argued that the company can still make a profit on books even with the price reductions. Unlike Amazon.com, Buy.com doesn't need costly warehouses since it depends on distributors to ship merchandise directly to customers. The main distributor for Buy.com's book business is Ingram Book Group, Blum said.
Analyst Ken Cassar of Jupiter Media Metrix, however, is wary about whether Buy.com will be able to keep it up.
"I don't believe that Buy.com's pricing and shipping structure is economically sustainable. It will buy them market share in the short term from Amazon.com, but the big question is whether that will (last)," he said. "People will want to buy one book, but when the promotion is over, the question is: Are they going to come back?" |
