The Lowest of the LowWhen Scott Blum launched web retailer Buy.com in November 1997 with the slogan "The lowest prices on earth," the company only sold computers. But Blum always had his eyes on much more. He had the foresight to purchase the rights to more than 4,000 domain names, including buymusic.com, buystuff.com, and buycars.com, in anticipation of future expansion. Now ranked No.2 (after Amazon) in PC Data's list of the top 20 Web retailers and "Best of the Web" for computers and electronics in the Forbes spring 2000 issue, Buy.com has created a site to rival any brick-and-mortar store. By late 1999, its offerings had expanded to include over 1 million books, games, software, electronics, CDs, and other products. CEO Greg Hawkins has led the company since March 1999 in preparation for its projected $150 million IPO, announced eight months later. Blum, still the majority owner of the company, stepped down that month to start a new venture capital firm.
While enjoying rapid expansion and generally favorable customer satisfaction ratings, Buy.com has had its share of legal problems. In February 1999, the company mistakenly offered a computer monitor usually priced at nearly $600 for only $164.50 - and was flooded with more than 1,600 orders. The company honored the lower price for the 143 monitors it had on hand, but refused to fill the rest of the orders, prompting a lawsuit by a group of irate customers who claimed that the site has a pattern of intentionally pricing items incorrectly. Buy.com faced another lawsuit in August of that year, when California computer outfit Gura Computer Technology claimed the company breached a reseller agreement.
How Low Can They Go?
Nevertheless, Buy.com has managed to stay ahead of the competition. Recent ventures such as a partnership with United Airlines to create Buytravel.com, and growing international business in Australia, Canada, and the United Kingdom have all helped fuel Buy.com's healthy expansion. Though still not profitable, it is the fifth-largest Web retailer in terms of revenue ($459 million in 1998). This is in part a result of effective advertising campaigns, on which the company spent approximately $50 million in 1999. Unlike some of its competitors, Buy.com eschews Web banner ads almost entirely in favor of "old" media - TV, magazines, and billboards all figure heavily in its strategy. Buy.com recently found another way to publicize the company; it has taken over sponsorship of the former Nike Tour, a golf tour to showcase aspiring PGA players. The Buy.com Tour is a charity event. The tour itself has raised close to $16 million since 1990. Such brand and image building should help Buy.com hold a more stable position in the unsteady world in which it exists.
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