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To: Neal davidson who wrote (75607)	3/6/1999 10:32:00 AM
From: gnuman	Read Replies (2) \| Respond to of 186894

Text of CDT complaint to FTC cdt.org

To: Neal davidson who wrote (75607)	3/6/1999 2:52:00 PM
From: Amy J	Read Replies (1) \| Respond to of 186894

Neal, Re: "Has anyone found a site the sells for less than buy.com?" Buy.com is Amazon.com's new competitor I was referring to in my other post. Buy.com sells books at cost (and most likely they apply this same biz model to their other products.) At first glance, selling at cost sounds like this would definitely result in the most inexpensive place to shop for products. Not always true and here's why: Equations: Buy.com list price = buy.com's b-cogs Amazon's list price = amazon's (a-cogs + gross margin) Buy.com will cost more than Amazon if: b-cogs > (a-cogs + gross margin) It appears Amazon's cogs a-cogs is < b-cogs. Why/How? Answer: Because of Amazon's higher volume. Amazon's product focus and their early deployment have yielded them a distributor's price volume schedule which is extremely low. So, a-cogs + a-gross_margins < b-cogs, provided Amazon maintains higher volume. It doesn't hurt that Amazon's distributor (disty) is Baker & Taylor (BT) and BT is the 6th largest account of UPS (i.e. lower shipping fees to Amazon, which you may or may not see as a consumer.) Also, BT owns some Amazon stock. Interestingly, I noticed Barnes and Nobles made an attempt to purchase some book distys as a way to reduce their cogs and fight Amazon. However, the problem with this method is: it would be very hard to buy BT - they are one of the largest distys in the USA - and are tight with Amazon. Buy.com's strategy for making money is: become a large portal site and then generate revenue thru ads. The more eyeballs, the more ad $. Translated: if Buy.com's biz model works, then product companies will be working for Madison Avenue, so maybe Intel should buy some advertising companies ;) Just kidding. I hope Buy.com's biz model (sell at cogs) doesn't work because it would put pressure on a product company's cogs & gross margins - which affects profit margins, employee salaries, and the stock of product companies. Amy J