Buy.com

» see buy.com as it lived, on the wayback machine

~ the goodbye ~

in the late 90s i was a teenager on a 33.6k modem in ankara, and buy.com was a california price war i could only read about. it did not ship to turkey and it was not trying to. the whole idea, selling a computer below cost to grab market share, belonged to a us market with venture money to burn and next-day shipping to lean on. i had neither, so buy.com stayed a name in the tech press for me.

the model was simple and reckless. scott blum started it in 1997 to sell computers under cost, betting he could make the margin back on advertising and add-on services. it worked as a growth story. $125 million in that first full year beat the record compaq had held since 1984, and the site expanded past computers into software and games. the february 2000 ipo landed right as the bubble was starting to leak.

the problem was that selling below cost is a great way to grow and a terrible way to earn. buy.com lost money on the actual selling and the ad revenue never covered the gap. blum took it private in 2001, then sold it and later bought it back. the company drifted through the 2000s as a second-tier retailer in amazon's shadow. rakuten bought it in 2010 for $250 million, ran it as rakuten.com shopping, and by january 2013 the buy.com name was gone.

~ the chronicle ~

~ the decline ~

the below-cost trick had one flaw that never went away: customers came for the price and left when the price moved. there was no loyalty to buy, only to cheap. amazon was building the opposite, a habit and a catalog deep enough that people stopped comparing. buy.com kept discounting into a market where discounting alone stopped being a strategy, and margins that were thin by design got thinner every year.

~ what got buried with it ~

buy.com mattered because it proved the dot-com thesis and the dot-com trap in one company. you really could beat an incumbent's sales record in a year by pricing below cost. you also could not keep a business alive that way once the free money stopped. rakuten kept the infrastructure and the customer list and threw out the brand, which by 2013 was worth less than the domain it sat on. the buy.com name still redirects, a tombstone pointing at a japanese retailer most americans never adopted.

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