Retailer John Lewis will buy the UK operations of Buy.com.
It emerged this weekend that UK department store and supermarket group John Lewis is negotiating to buy the UK operations of US office equipment eTailer buy.com. The US firm last week reported larger than expected losses of $27.4 million, announced it would sell its UK subsidiary, closed its Canadian business, abandoned its other European ventures and cut 25 jobs.
It looks like a fairly sensible move for both companies. Buy.com desperately needs to reach profitability if it is to keep its investors satisfied; given the current climate for pureplay eTailers, this will not be an easy task. While the UK operation has potential and has seen substantial investment, it is even further from profitability than the US site. Buy.com’s best policy is to lower its ambitions and aim to do one thing successfully – as also shown by its move away from low-margin books and CDs to higher-margin computer equipment.
John Lewis, meanwhile, should benefit from Buy.com’s UK assets. The UK operation is already focused entirely on computer equipment, so the retailer will not need to make any major changes to the site’s business plan. However, it does have the logistics support and the money needed to take the site through to profitability.
Perhaps more importantly, John Lewis will gain 90 staff with experience of creating and managing an eTail site, as well as the eTailer’s technology solutions. This will help John Lewis in its long-run aim of creating a major online retail presence at its johnlewis.co.uk site, ultimately aiming to leverage its brand and product range into eCommerce. John Lewis’ site currently only offers 1500 products, compared with the thousands of products available in its conventional stores. Clearly, Buy.com’s expertise will help the company’s planned expansion. If all goes according to plan, John Lewis could soon find itself a major player in UK eTail.
