e-tailers warn buy.com faces rocky road ahead

Australian e-tailers have issued a stern warning to the much-hyped US e-tail heavyweight buy.com that it cannot expect to simply stroll into the local market and take over.

The missive came as buy.com prepared for its official launch into the Australian online retailing market last week.

While retailers agree the presence of more online stores would boost the local market, they feel the company must be wary of the differences between Australia and the US.

"We have seen lots of American companies come and go," said ozbuy.com general manager Michael Glezerson.

"Entering the Australian market is not going to be easy - there are some very strong players who have been around for years. I don't think they will do in Australia what they've done in America," he said.buy.com, which launched its Australian site on May 4, is ranked in the top five US online retailers. The company is a joint venture between buy.com, Softbank and epartners, which is 50 per cent owned by News Corp.

While the Australian site works on the model of the US parent company, local retailers say it will not be able to employ the same strategies in the local market.buy.com's past sales strategies have revolved around very low to zero profit margins, with most revenue coming from banner advertising. After its IPO in October last year, the company was under massive pressure to return a profit, Glezerson said.

"The days of price cutting and running at a loss are well and truly over," he said. "You simply can't run a business that doesn't make money."

But Glezerson welcomed the competition the e-tailer would bring to the market.

"It's nice to see new online businesses starting up because it encourages others to go online and it encourages competition," he said.

The launch of buy.com's Australian site has not been without hiccups, including legal action over the Australian domain name, buy.com.au, owned by online auctioneer Duncan Angus. buy.com was able to circumvent the problem by having customers go through the US portal and select which country they purchase from.

"I think they will encounter a few problems in the Australian market - the most obvious is having no URL for Australia," said estore's general manager Steven Spilly. "It is not an insurmountable problem, but it is major. If I were starting an online retailing store here, I would change the company name to make sure I got an Australian address."

Spilly said the company will find the Australian market very different to that in the US.

"I hope the company succeeds because it will help build the market," he said. "Their entry into Australia will open up the market and provide benefits for us and the market in general. But there are no guarantees and so far we have seen some spectacular well-funded failures.

"If they try to adopt the same sales techniques as they do in the US there could problems. As a public company, they cannot position themselves on price. They will have to offer more than just discounts in terms of customer service and delivery.dstore's general manager, David Gold, said he welcomes any new entry into the market. But he agreed buy.com would be unable to operate on a low-margin basis.

"Even if the advertising market is sustainable in the US, it is not in this market," he said.

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