Aussie e-tailers nervous after buy.com flop

As Buy.com.au dipped beneath the waves late last week, its competitors took stock, hoping the market doesn't get much worse and the promised Christmas rush keeps the ball rolling.

          As Buy.com.au dipped beneath the waves late last week, its competitors took stock, hoping the market doesn't get much worse and the promised Christmas rush keeps the ball rolling.

          "It's probably hit rock bottom right now," commented Steven Spilly, eStore managing director and a former direct competitor with buy.com.au.

          Brendan Walsh, marketing director at catalogue and web retailer PAW Products, said the buy.com wreck signals the start of "round two", where investors have started looking for "real business models". "There's going to be a fair bit more fallout," he said.buy.com.au closed its virtual doors on November 22, following rumours it had been in last-minute merger discussions with dstore, which also is apparently scrambling for funding. Meanwhile, rumours surfaced last Friday that online auctioneer bidorbuy.com.au was also on the financial skids.

          These are shaky times indeed for the Australian online retail market, which is finally witnessing serious fallout from April's global dot-com stock market correction.

          As ozbuy.com's managing director, Michael Glezerson, observed in an earlier interview with ARN: "Gone are the dot-com days - the Internet days have arrived."

          Central to buy.com.au's decision to quit was the need to appease nervous investors, which company officials said would interpret the US-driven consolidation as "a prudent move to maintain flexibility".

          So despite significant local financial backing from backers Softbank and News Corporation's ePartners group eVentures, the local version of buy.com was unable to ride out the storm.

          Competitors were quick to point out the company's failings, pointing to a flawed business model, high cash burn rates, and inefficient systems as significant contributors.

          "You can't keep a business model that doesn't make money," commented PAW's Walsh.

          According to eStore's Spilly, there are better ways to build revenues and customer loyalty than expensive adverting campaigns. And he believes brand recognition is only part of the story, where successful marketing is concerned.

          "I did hear (buy.com.au) had to touch every order six or seven times, so you can't afford to operate like that," he explained.

          Spilly then mounted a defence of his own company, stating it is not reliant on funding with three private investors including himself. "We are not reliant on funding," he said.

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