A North Carolina-based e-tailer is making shopping a little more guilt-free for spendthrifts. BuyCause.com, which launched on the Internet in late August in time for the holiday shopping season, is pitching itself as an alternative to online retail giants like Amazon.com or Shop.com by allowing consumers to donate part of their purchase prices to one of over 700,000 nonprofit organizations.
Customers also can direct the money into a tax deductible 529 college savings plan or get cash back.
“You have basically three choices,” said CEO Ed Thompson. “You can do whatever you’d really like with the (extra) money.”
The company said even though it offers prices similar to those found on Amazon.com it’s still making a 7 percent to 8 percent profit, all the while funneling five to 30 percent of every product sold to charity.
“It’s not like we’re jacking up prices 5 to 30 percent,” said Grant Landis, company spokesman. “We’re starting at the same price they are.
Landis said this is possible because BuyCause operates a much leaner business with less money going to labor and warehousing than its bigger competitors.
Since BuyCause orders directly from the manufacturer instead of buying in bulk and warehousing its products, Landis said expenses are lower and consist of a handful of customer service and technology staff, plus costs to operate the Web site.
“Everyone has this sense that e-commerce companies are selling for as low as they can sell. That is a total fiction,” he said.
“Amazon has a ton of expenses that aren’t related to actually selling the goods,” he added. “On our end, we don’t’ have any extraneous expenses.”
Landis said the company is already profitable and plans to donate about $2.5 million to charity in its first year.
Thompson, who runs the privately-held company jointly with his high school buddy Jason Pinto, said they hope to make $100 million in revenue in their first year. He said he thinks the company has the potential to eventually surpass the Bill & Melinda Gates Foundation, which contributes billions to causes around the world.
“We’re really, really looking to do something that’s huge and to make a difference,” he said.
Patti Freeman Evans, an analyst with the consulting firm JupiterResearch, said she’s skeptical about the company’s plans to surpass Amazon in the number of products it sells by next year.
“To say that they’re going to outpace Amazon anytime soon is probably really ambitious,” she said. “I mean Amazon is by far the leader by, like, billions of dollars.”
Trent Stamp, president of Charity Navigator, a group that evaluates philanthropic organizations, said although there are many businesses with similar models as Buy-Cause, many of them cease to prosper because they are unable to get the charities behind them.
“There are a million of these things,” he said. “If these guys show that they’re the ones and they start getting, you know, big media and the whole thing, it will work. But it’s going to work when the charities are willing to market this to their users.”
Stamp said he’s leery about people feeling that they are making a difference through their consumer purchases.
“If you think then it’s going to take the place of your charitable giving, the odds are that the charities are going to get ripped off in the end,” he said.
Jim Ward, a services marketing and management professor with a focus on ecommerce at Arizona State University, said the business could thrive if it fosters a reputation for reliability, cost competitiveness and honesty.
“Consumers need to trust in the company’s promises of giving and feel that it is a trusted conduit ... for their contributions,” he said.