Buy.com Is No. 2 But Trying Harder
By Alan Wolf -- TWICE, 7/16/2007
ALISO VIEJO, CALIF. — Just like the old Hertz vs. Avis rivalry, Buy.com is flaunting its No. 2 status behind Amazon.com.
Marking its 10th anniversary, the e-tail pioneer, founded by semi-retired chairman Scott Blum, has emerged from a recent corporate downsizing with a redesigned Web site, 10 million customers and 2 million SKUs, a 68 percent increase in gross profit to $60 million in 2006, and a new image campaign that positions it as an upstart alternative to its larger competitor.
Leading the renaissance is president/CEO Neel Grover, who spoke with TWICE about the revitalized half-billion-dollar business.
TWICE: How has Buy.com changed over the past 10 years?
Neel Grover: I'll start by telling you how we haven't changed. Both then and now, our focus is on selling name brands at commodity prices. Also, we still follow a virtual model — we have no inventory. Twenty-three different distributors fulfill our orders, although we have very extensive vendor contacts and work with manufacturers directly on programs, inventory and allocation, while the distributors buy, store and ship our inventory. So we're not direct and we're not two-step. We're a hybrid.
What's different today is that we no longer sell products below cost. We did do that originally, making it up through advertising, and were profitable in our first year.
What's also different is the site itself. We fully redesigned and re-launched it last October. It was our biggest year for enhancements. We're focused on the customer experience and after looking at everybody — Amazon, the core CE retailers — we saw that not everyone offered as good an experience online as shopping in-store. So we added richer content with more product detail for our customers, who tend to be more techno-savvy, and made our site more convenient to shop.
TWICE: How have you enriched the content?
Grover: One thing we did was launch Buy.TV, an online show hosted by two longtime employees and produced in our own product studio. Each show is two-and-a-half to three minutes long and focuses on four different vendors. We now have 400 shows available on the site, plus a library of 60-second product reviews by our merchants, that auto-stream on the product pages. It's a rich experience because you're hearing it from the source, and it's better than the offline experience.
We also enable consumers to upload their own video reviews, and accept uploads from manufacturers and import some third-party content. We try to add as much video as possible.
We also offer free shipping on most products, $10 off by using Google checkout, a "Deal of the Day" feature, and added a price comparison service that shows all of the prices that are out there on a particular product. We're one of the only sites to do that.
TWICE: What if the search turns up a better price elsewhere?
Grover: We hope that we'll have the best price, but it shows everything. We figure that consumers are going to comparison shop anyway.
TWICE: Any other changes?
Grover: We've added a third-party marketplace to help round out our assortment. About 100 retailers are represented, comprised of Internet retailers and brick-and-mortar stores, but not individuals, at least not yet. We get a commission on sales, and plan to have 500 retailers by the end of the year.
Also relatively new are our branding and marketing efforts. We kept a low profile over the last couple of years while we took out some of the fat and made the company very lean. Now we want to get the word out that we're a great place to buy from and partner with, that we're the good guys out there. We're not a household name, and we have a big opportunity to grow.
TWICE: What's your mix?
Grover: About 85 percent of our sales are in technology and consumer electronics, with entertainment and leisure making up the balance. Our top categories in technology are notebook computers, LCD monitors, printers and storage. In CE, we also sell a lot of GPS devices, digital photo frames and MP3 players, and have some new CE authorizations.
TV is a big area of focus for us because consumers have become much more comfortable purchasing them online. We sell more LCDs than plasma or DLP, and have seen a big increase in sales of screen sizes 32 inches and up. Right now we offer white-glove delivery service for large TVs, and are looking at ways to offer home installation.
Even though we're expanding our product assortment — we just added a beta baby tab — CE and IT will remain our focus.
