Buy.com Shutters Global Operations and Shifts to Online Marketing

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Internet retailer buy.com Inc. will walk out of international markets after reporting fourth-quarter sales that were well below Wall Street estimates.


Sales this fourth quarter fell to $196.7 million, from $200.7 million in the same quarter in 1999. Wall Street analysts expected fourth-quarter 2000 sales of $220 million.


The Aliso Viejo, CA, retailer reported narrowed fourth-quarter losses, however. After including extraordinary costs in the quarter, buy.com posted a net loss of $36 million, compared with $49.6 million in the fourth quarter of 1999.


"The fourth quarter was an intensely competitive environment with general softness in the technology sector," buy.com chairman/CEO Greg Hawkins said in a conference call for analysts.


Hawkins said tough online retail market conditions have forced buy.com to "reevaluate our business and implement several strategic initiatives designed to accelerate buy.com's drive towards profitability."


The company will also shift away from its low-price model in order to raise margins, a move that it acknowledged would cost it much business in the year ahead. It will now focus on core categories like computers, software, wireless, clearance items and consumer electronics.


These products are more profitable to the company than entertainment-oriented sports, books and music -- items that had low margin and proportionately higher handling costs.


In a series of measures that reflects the new austerity, buy.com has sold its British operations to an undisclosed European marketer, shuttered its Canadian store on Friday and folded an Australian joint venture.


But there was good news for proponents of Internet marketing over traditional.


"The company will focus most of its 2001 discretionary marketing resources toward online marketing media in its core categories," the buy.com statement said. "In addition, the company expects to greatly reduce overall marketing expense seeking to generate greater marketing efficiencies."
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