Play.com, one of Amazon.com’s biggest competitiors in the UK has sold for what seems like quite a low sum, £25 million; especially since the site’s annual turnover is thought to be around £500 million from UK DVD sales alone.
However, one of the reasons this site does so well is that it’s Guernsey location allows it to enjoy a tax loop hole. Sales of items from the island that are under £18 can avoid VAT. This allows the site to sell products under this threshold for prices that UK mainland competitors can’t match. The free postage that Play has offered since it’s creation has also helped set it apart from other sites.
As of next year though, this threshold is expected to be lowered to £15 in November, with no loop hole at all as of March next year, meaning Play will lose much of its DVD sales market; there is also the fact that DVD sales are going to decrease rapidly over the coming decade as Blu Rays and digital downloads of movies and games become far more dominant.
The company behind the buyout is Japanese firm Rakuten who for the next year at least is likely to do quite well on their acquisition.