Credit Card Woes Might Close

Online retailer (Nasdaq: BUYX) might have to close its doors because its credit card processor plans to end their relationship on September 1st, according to’s quarterly filing with the U.S. Securities and Exchange Commission (SEC) this week.

“Since over 90 percent of the Company’s revenue is derived from credit card transactions, if the Company is unable to secure a new credit card processing relationship on acceptable terms, it is not likely that it would be able to continue as a going concern,” the filing said.

“ will probably end up getting a new credit card processor in the 11th hour,” Forrester analyst James Crawford told the E-Commerce Times. “But it will have to pay incredibly high rates, which will hurt its margins even more.” management was unavailable for comment.

Tough Crowd’s credit card processor originally intended to dissolve relations on July 23rd, according to the SEC filing, but postponed the termination to September 1st, “on the condition that the Processor would increase its processing fee by 1 percent and would withhold 5 percent of the Company’s daily receipts as additional security.”

Crawford said that is the victim of a very competitive e-tail market, where there are very few Internet pure plays left. Indeed, even (Nasdaq: AMZN) has been making ties with brick-and-mortar partners, most recently Circuit City.

“ wasn’t holding any inventory, either, selling direct from Ingram Micro,” said Crawford. “So they offered poor customer service and were losing money on every sale.”

Unhappy Days

The credit card transaction hurdle is the latest in a series of setbacks for, following a 40 percent workforce reduction on August 13th and a Nasdaq delisting on August 14th. is now awaiting stockholder approval of founder Scott Blum’s purchase of the company, deemed by industry observers to be one last attempt at a lifeline. It is unclear if’s pressing credit card woes will impact the acquisition.

If the acquisition is approved, Blum, who once served as’s chief executive officer, would merge with his other property, SB Acquisition, by November. However, Crawford does not hold out hope for’s resurrection following the acquisition.

“The buyback will save the company from Chapter 11 (bankruptcy), but not from demise,” the analyst said.

Familiar Story has been marred by other hardships, including being sued by shareholders for allegedly working unlawfully with underwriters to drive up the price of its initial public offering (IPO).

The trajectory of the company’s downturn mirrors that of many of its beleaguered peers. During its first day of trading on February 7, 2000,’s stock price rose more than 90 percent, for a market capitalization of more than US$3 billion.

As of Wednesday,’s securities were quoted on the OTC Bulletin Board at 14 cents per share.

Ironically, was honored in July 2001 as “Best E-Commerce Site” by a major technology publication.


  • Mark, you left out the most important info in the article. . .why did the credit card processor threaten to sever the relationship? Too much fraud or what? Thanks for your reply. DB

    • yeah..second THAT!! The rest of us in the Internet ECommerce credit card conundrum (both companies) want to know why they were booted and who was the processor? FDMS, CMS, Paymentech, or who?


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