Buy.com Sees, Raises Amazon's Free Shipping Bet

Like Amazon's expanded offer for free shipping, the Buy.com deal will run for a limited time. But unlike Amazon, which said it will run its promotion for three to six months to gauge its viability, Buy.com did not place a specific time frame on its deal.

Brent Rusick, Buy.com's chief operating officer, told the E-Commerce Times that the e-tailer plans to run the promotion for as long as possible.

"Attorneys get involved and make you say things like 'limited time,'" Rusick said. "We're going to run this as long as [it is a] big driver for consumers, as long as it makes sense."

The Buy.com offer does not apply to international shipments and is valid only on certain products.

Action, Reaction

Buy.com founder and CEO Scott Blum made no attempt to hide the fact that the move was a direct competitive reaction to Amazon's offer, announced Tuesday.

"Amazon claims they 'lowered the hurdle' with their free shipping offer -- Buy.com just ran that hurdle over with our free shipping truck," Blum said. "Our site-wide free shipping offer is just one more reason to shop at Buy.com instead of Amazon."

Citing Buy.com's no-inventory business model, COO Rusick said: "We've spent the last year getting the company into the shape it needs to be in to do things like this. We wanted to one-up Amazon."

The Biggest Hurdle

Many analysts have long predicted a move toward free shipping within the e-tail world as online retailers expand their once razor-thin profit margins through cost savings.

Forrester Research analyst Christopher Kelley told the E-Commerce Times that shipping costs are cited even more often than online sales taxes as roadblocks that keep consumers from spending more on the Web.

"The problem with shipping costs, as with sales tax, has traditionally been that shoppers don't know how much they're paying until they are at the last step of the checkout," Kelley said, noting that he has long believed online merchants should search for ways to eliminate shipping fees. "They hold buyers back, both potentially new shoppers and those who might buy more."

Over time, Rusick said he believes all online merchants will operate with free shipping models. "People weigh in their minds what the total cost of a purchase is going to be," he said. "It's hard for them to compare time savings with actual dollars spent."

Point, Counterpoint

The latest back-and-forth comes as Amazon looks to strengthen its position in the electronics category, where pure plays are facing increasing competition from Best Buy (NYSE: BBY) and other brick-and-mortar chains.

On Tuesday, Amazon quietly began adding Sony (NYSE: SNE) electronics to its listings. Previously, Sony had refused to use Amazon as an outlet for its goods. Buy.com already sells Sony goods.

Back from Brink

Buy.com nearly folded last summer. After being booted from the Nasdaq, it faced an uncertain future when its credit card processor threatened to terminate its relationship with the e-tailer.

But Blum stepped in, provided cash backing to convince the credit card company to stay, then bought Buy.com and took it private.

Since then, Buy.com has been aggressive in its marketing approach.

Top Retailer

In January, the company quickly matched Amazon's $99 free shipping deal, and at the same time said it would launch a Buy.com magazine featuring product reviews and other content. It also revamped its approach to international shipping in a nod to the importance of overseas sales.

Rusick said Buy.com has seen no change in average order size since it moved from standard fees for shipping to its own $99 threshold offer. "I think over time, people will shop online more like they do in stores," he said. "They'll be less wary of adding something else to the shopping cart."

Earlier this month, Blum's Think Tank announced plans to license Buy.com's e-commerce technology to other companies, hoping to duplicate the success Amazon has had in lending its patented online approach to third parties.

Despite its rocky history, Buy.com continues to be cited as a top online retailer by analysts and in public opinion polls.