Amazon in the Crosshairs

It's no secret that Amazon.com (Nasdaq: AMZN  ) has plenty of rivals that are just dying to steal some of its market share, but today one such rival put the Internet giant perfectly in the crosshairs. Buy.com, another holdout from the Internet bubble days, said that it plans to undercut Amazon on book prices.

Buy.com made no bones about its intentions in its press release today; indeed, it was titled "Buy.com Initiates Price War with Amazon.com." The company committed to undercut Amazon's prices on books by 10% for the rest of the year in a promotional initiative that it says may become permanent.

Too bad this isn't exactly a new game plan. Buy.com pulled exactly the same maneuver back in 2002 (click here to see our coverage at the time). The only difference is Buy.com isn't trying to undercut Amazon's shipping rates this time around.

Buy.com obviously isn't the only company sniping at Amazon. Consider Motley Fool Rule Breakers pick Overstock.com (Nasdaq: OSTK  ) , which has always tried to lure customers through its emphasis on closeout savings and an online outlet-type offering. Back in 2003, Overstock made an even bolder move, stating that it would undercut Amazon's prices by a substantial 25%. Although it's been hard to argue that Amazon suffered any degree of pain, Overstock has had grand success in increasing its name recognition -- and revenues! -- over the course of the last two years.

One might wonder why Buy.com would decide that now's the time to take on Amazon once again. When I wrote about an Amazonian disappointment recently, email feedback from readers gave me the impression that maybe Amazon is running some risk of slipping in loyalty, given some slow and less-than-stellar service coming from some of its third-party suppliers. It stands to reason that the larger it gets, the more opportunities there will be for some of its order execution and customer service to falter.

It is, of course, hardly surprising that these companies would sacrifice profit margins to grab market share -- this is exactly the way that Amazon made a name for itself so long ago. What with some of Amazon's other recent moves causing pressure in that regard, a price war may be the last thing it needs.

Despite the fact that Buy.com has pushed a similar promotion in the past, maybe now is a better time to start fishing for the chinks in Amazon's armor, and Buy.com probably will steal some customers and drum up some business. However, Amazon retains a killer brand in e-commerce that won't be all that easy to undermine.

Amazon.com is a Motley Fool Stock Advisor stock. Overstock.com is a Motley Fool Rule Breakers pick. Try a 30-day free trial by clicking here and here, respectively.

Alyce Lomax does not own shares of any of the companies mentioned.