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Watch out for buy.com: Analysts

Watch out for buy.com: Analysts

buy.com has announced strong second quarter financial results, but profitability remains elusive.

The e-tailing giant reported Q2 revenues of $US193.2 million, up 49.4 per cent compared to the same quarter last year. The growth was driven by a 195 per cent increase in new customer accounts, while repeat orders accounted for 62 per cent of sales.

However, net losses came in at $33.6 million, or 26 cents per share.

The results, while slightly down on analysts' expectations, still represent a sizeable margin improvement; up 1.8 per cent overall on Q1 results. Gross profit improved by 33 per cent to $11.8 million.

Market analysts said the figures were encouraging, despite the red bottom line.

"The interesting thing is the company is committed to being a multi-category vendor so it is building aggressively across categories in the US," said Richard Harris, vice president of analyst Gartner's e-business division. "If they don't achieve that dominance, they will fail."Despite the US site's expansive range of merchandise, the most successful categories remain comp- uter hardware and peripherals and electronics.

The company, which recently settled with online auctioneer Duncan Angus to buy the Australian URL for an undisclosed sum, did not release any local figures.

However, analysts say buy.com is positioning itself strongly in the Australian market and computer retailers should take notice.

"If I was Harris Technology I would be very nervous," said Harris. "There aren't too many e-tailers that will survive into the future but buy.com is establishing some good alliances and partnerships which could ensure its survival."Harris said it was a sensible approach based on country-specific personalisation. In Australia, the e-tailer is concentrating on the home office and SME markets. "buy.com is being selective about what segments it is choosing for each area. In Australia, that could work quite well, building a sound base on individual customers. It is a fairly good business model. Ninety per cent of sales are related to technology, so the company is challenging many e-tailers."He said while no e-tailer shone in the area of fulfilment, buy.com was forming partnerships with key manufactures that are already set up to handle purchase and delivery issues. "Unless you have great reliability with delivery, you are going to struggle, particularly in securing repeat business, which is crucial."buy.com welcomed the announcement of second quarter financial results, although the company refused to comment on the impact they would have on the company's Australian operations.buy.com Australia is a joint venture between buy.com Inc and eVentures Holdings, itself a joint venture between epartners, the e-commerce venture capital arm of News Corporation and Softbank Corp.

A spokesperson for buy.com (Australia) said that the significant increase in gross margin and gross profit, as well as the continued strong growth in customer accounts, all pointed to a clear path to profitability and demonstrated the success of the US operations.

"In the short time since buy.com was launched in Australia in May, the results have been similarly very pleasing and, importantly, above expectation," he said.


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