Buy.Com inc - Initial Reactions Were Skeptical

Barely two months after the Buy.com Web site was launched, Fortune magazine described it as a "seemingly crazy new model" and compared it to a Web site selling dollars for 85 cents. If Buy.com proved to be successful, the magazine argued, it would demonstrate that it was possible to build a brand completely on price. It also would have revolutionary implications for Internet retailing.

Buy.com originally was BuyComp.com, a discount seller of computer products founded in October 1996 by Scott Blum. BuyComp.com was selling about $1 million worth of computer products a day when it changed its name to Buy.com in November 1998. The name change reflected the wider range of products the company would sell. With $60 million in venture capital financing from Japanese software distributor Softbank, Buy.com was able to acquire SpeedServe, the Internet division of Ingram Entertainment that sold videos, DVDs, books, and computer games. Almost immediately the company launched a consumer advertising campaign that included national TV spots and print advertising. Buy.com offered videos and DVDs through a new sub-site of Buy.com called BuyVideos.com, thereby establishing a pattern it would follow of creating specialty stores for new product lines. To prepare for the addition of new specialty stores, Buy.com purchased the rights to more than 2,000 domain names beginning with the word "buy."

If Buy.com 's business model was to work, the company had to offer the lowest prices on the Internet. To accomplish this Blum spent more than a year perfecting search agents that would automatically scan the Web for the lowest prices on products he was selling. The company also did not carry any inventory, instead having wholesalers ship products directly to Buy.com 's customers. The company got off to a fast start. For 1998 it posted sales of $125 million, beating a 15-year-old record held by Compaq Computer Corp. for a company in its first year. By February 1999 it was selling about $2 million worth of merchandise a day, and for 1999 it reported total revenue of nearly $600 million.