Meet Mister buy(everything).com
Richard,
I am assuming you are referring to this article in Fortune magazine.
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Part 1: CEO Scott Blum
The world's most ambitious e-retailer is also a first-class athlete: Scott Blum surfs regularly in his backyard, the Pacific Ocean.
Eric Nee
Sitting atop a bluff overlooking the Pacific, Scott Blum's house is a modernist fantasy that sticks out from the drab, conservative homes around it. Most of the other houses in Ritz Cove, a plush, gated community just south of Laguna Beach, Calif., are typical, albeit large, examples of Orange County architecture. A mishmash of Mediterranean styles--Ionic columns, red-tiled roofs, walled courtyards, wrought-iron hardware--the houses are painted in muted whites, pinks, or browns.
Not Scott's house. His 6,800-square-foot home is a set of interconnected geometric shapes built from poured concrete, green glass, and stainless steel, a sleek design that somehow suits its natural surroundings. "Some people tried to stop me from building it," says Blum, 35. "They even threatened to sue me." But they picked the wrong guy to intimidate. Scott Blum has made a living out of getting what he wants. And he really wanted oceanfront property in Ritz Cove. Back in 1984, Blum (rhymes with "plum") was a 19-year-old parking-lot attendant at the adjacent Ritz-Carlton Hotel. "I told the other attendants that someday I was going to own a house in that development," says Scott. Last year, after four years of legal wrangling, he and his wife, Audrey, moved in.
Soon Blum may have enough money to buy the whole development, and the hotel, if he so chooses. Buy.com, the e-commerce company he founded less than three years ago, will probably go public in the next few months with a valuation of ten times the company's annualized revenues, or roughly $4 billion. Scott, who is chairman of the company, owns 65% of the stock. The actual value of Buy.com will depend on tangible stuff, like its revenue growth rate, and also on less tangible factors, like investors' appetite for Internet stocks. One thing the valuation will not depend on is the company's profits.
That's because the business plan for Buy.com, headquartered in Aliso Viejo, Calif., is as bold--or reckless--as the design of Scott's house. The company resells computers and other products at or below cost, and is now losing "a couple of million dollars a month," according to the president and CFO, Allen Barbieri. That's the plan: Like other e-businesses, including FreePC.com and online auction house OnSale, Buy.com aims to build a large base of loyal customers who will return again and again to its Website to buy products. The goods themselves are bait. The profits--yes, these companies all intend to turn a profit someday--will come from the sale of advertising and ancillary services like warranties and equipment leases.
It's too early to say whether the model will work, but Buy.com is furthest along in implementing the plan. The company's slogan, "the lowest prices on earth," is attracting customers. Buy.com launched its Website in November 1997. At first it sold only computers, but now it offers software, books, videos, and electronic games, with CDs and other products soon to come. In 1998, Buy.com had about $125 million in revenues, and Barbieri expects to do three to five times that in 1999. With those kinds of sales, Buy.com is off to one of the fastest starts of any U.S. company.
It's not enough for Blum. He's purchased the rights to more than 4,000 Web addresses covering all kinds of products that he might sell, including buymusic.com, buystuff.com, buyetoys.com, and even buycars.com--which may explain his recent two-hour breakfast with Jacques Nasser, the CEO of Ford Motor. (More on that meeting later.) "My goal is to reach $10 billion in revenue with 1% gross margins on product sales," he says. And he'd like to get there by 2003.
Part 2: Would-Be Sam Walton
Part 3: Pushing to the Edge
Part 4: Buy.com's Senior Team
Vol. 139, No. 6, March 29, 1999
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