Question

What is the “Pure Play Approach?”

Answer 1

Answer : Pure play approach of a company means a company focus only on a particular product or commodity. Invest in a pure play company means invest in particular product or company. For example a coffee shop is pure play restaurant.

E commerce companies may referred to as pure play retailers as they sell their products only through internet.for example Amazon , flipkart etc as it sell products only through internet, no physical shop or stores .

In finance, pure play method is an approach used to estimate cost of equity capital of private companies which involves calculation of beta cofficient on the basis of data available of public and single line focused companies.

There are various advantages and disadvantages of pure play e retailers-

Advantages:

1. Pure play e retailers can serve wider public unlike traditional stores or shops which generally can serve to small range of customers.

2. Pure play e retailers target at specific group of customers without spending cost on obtaining information.

Disadvantages:

1. It lacks customers basis as there is no brand recognition at the start up stage unlike retailers who does business through online as well as offline.

2. Pure play approach lacks human touch. It does not examine real taste of customers.