Buy.com was founded in 1997 by Scott Blum. It was an e-commerce site whose gimmick was taking the concept of a loss leader to an extreme, trying to subsidize the low prices by selling advertising. In 2010, it was purchased by Japanese company Rakuten, rebranded as Rakuten.com, and ultimately shut down in 2020, ending a 23-year run.
Buy.com’s start as a loss leading e-commerce site
Buy.com originally sold only computers, below cost. It planned to make money through advertising and ancillary services such as sales of warranties and equipment leases. It later expanded into other categories such as software, books, videos and games. The company sold $125 million worth of goods and services in 1998, its first full year.
After raising $120 million from Japanese tech company SoftBank in 1998 and 1999, Blum sold a portion of his stake to SoftBank in 1999, retaining a 48% stake. Buy.com held a $195 million initial public offering on February 8, 2000. It went public at $13 per share and rose to $37.50 per share that day. It never went any higher.
Stock values dropped in the following year due to a combination of the dotcom bust and Buy.com’s unprofitability. It lost $133 million as revenue fell from $193 million to $94 million. On Aug 14, 2001, NASDAQ delisted Buy.com for failing to maintain a stock price above $1 per share. It was trading at 17 cents that day.
Buy.com’s comeback after its IPO and delisting
In February 2001, the UK department store John Lewis acquired the UK arm of Buy.com and used the technology as the basis of its own e-commerce site. In November 2001, Blum made a lowball offer to reacquire Buy.com for $13 million or 17 cents per share. It accepted, taking the company private. With 5 million customers, he thought it was ripe for a turnaround.
In 2002, Buy.com expanded further into sports equipment, apparel, shoes, health and beauty products intending to go head to head with Amazon. Buy.com also announced it would beat Amazon’s prices by 10% and offer free shipping with no minimum purchase required.
On January 25, 2005, Buy.com filed to go public again, but withdrew those plans in May 2007.
From 2007 to 2009, the number of products for sale in Buy.com’s marketplace grew from 2.3 million to 5 million, positioning it as the number two e-commerce site behind Amazon.com.
Rakuten purchase and rebranding
In May 2010 Rakuten, Inc., the largest e-commerce retailer in Japan, acquired Buy.com for $250 million in cash. This allowed Rakuten to enter the American e-retail market and to compete globally with Amazon.com and eBay. At the time, Rakuten in Japan had 64 million members, and Buy.com had 14 million customers, mostly located in the US and Europe. Half its products were sold directly to customers and half were sold through other e-commerce businesses using its online store.
On August 12, 2020, Rakuten.com sent an email to its customers stating that it would be closing its US operations as of September 15, 2020.
My experience with Buy.com
I wasn’t the ideal customer for Buy.com, I’ll put that out front. Buy.com tended to sell prebuilt computers and consumer-grade inkjet printers. They were going after Best Buy‘s customer base and I was beyond that by the late 90s. I wasn’t totally against prebuilts but would buy a prebuilt to get a serviceable case and drives, then upgrade the motherboard and video card to keep the machine going for a decade. While I visited Buy.com a lot and recommended it to a few people, I don’t think I ever bought anything but software or network cards from them.
What went wrong with Buy.com
I wasn’t as opposed to seeing ads as I shopped as you might think. And I don’t think the general public was, necessarily, either. The prices were low, and magazines of the time had ads in them. And let’s face it, today I’m bombarded with ads every time I go to the gas station to fill up, and Big Oil isn’t subsidizing the price I pay for gas with any of that revenue. The problem for Buy.com was they lost too much money on each sale. And you can’t make up for that in volume.
Buy.com wasn’t the worst e-commerce idea of its generation, for sure. It outlived Cyberrebate, Webvan, and Pets.com, for example. It didn’t have the logistics problems some of its peers did. The problem for Buy.com was it didn’t get the pricing balance right and never got the name recognition that many other e-commerce sites did.
But Buy.com’s idea of using advertising as a revenue stream certainly lives on today. It’s just that most companies aren’t using it to subsidize lower prices now. The ads for random stuff I see while pumping gas are the legacy of Buy.com’s experiment.
David Farquhar is a computer security professional, entrepreneur, and author. He has written professionally about computers since 1991, so he was writing about retro computers when they were still new. He has been working in IT professionally since 1994 and has specialized in vulnerability management since 2013. He holds Security+ and CISSP certifications. Today he blogs five times a week, mostly about retro computers and retro gaming covering the time period from 1975 to 2000.
They had the best prices on DVDs, which is what I bought there. Until they screwed up a return. Then I never bought from them again.