Buy.com challenges retailers to price war

The gloves have come off in the computer retailing industry as retail giant Dixons, online reseller Buy.com and traditional dealers prepare to fight it out for dominance of the sector.

The price war, sparked by the launch of Buy.com last week, prompted Dixons to reportedly cut the price of a Kodak digital camera by £296 and Buy.com to cut it by a further £6 in just one day. The battle is set to intensify as Buy.com pursues its aggressive pricing strategy.

But while it is "committed to beating prices anywhere else in the UK", Buy.com insisted it won't sell below cost as it did when it launched in the US. "There were two eras in Buy.com's history. The first involved selling below cost to build up volume and traffic as quickly as possible.

Phase two involved opening up new storefronts, which increased gross margins.

We won't start with phase one in the UK, we will start with phase two," said Murray Hennessy, chief executive at Buy.com.

Chips Godfrey, UK managing director at retail strategy consultant Levin Consulting, said Buy.com will have a major impact on online businesses and traditional resellers.

A Dixons representative said: "It is not a serious issue. There are lots of players in this market. We compete with them all in different ways."

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