A pure play company focuses solely on a particular product or activity. Investing in a pure play company can be considered as investing in a particular commodity or product of a company.
Pure play firms either specialize in a specific niche, or have little to no vertical integration. For example, a coffee shop may call itself a "pure play" restaurant, and a factory that only produces goods (not designing or selling to consumers) may refer to itself as a pure play manufactory.
E-commerce companies are often referred to as pure play retailers, as they sell only through the Internet.
Pure play methodEdit
In finance, the "pure play method" is an approach used to estimate the cost of equity capital of private companies, which involves examining the beta coefficient of other public and single focused companies.
Here, when estimating a private company A's equity beta coefficient, the equity beta coefficient of a public company B is needed; the latter can be calculated by regressing the return on B's stock on the return on the relevant stock index. The following calculation is then applied to return the beta coefficient of company A.
- Unlevered Beta of B = Equity Beta of B / (1 + DEB × (1 − Tax RateB))
- Equity Beta A = Unlevered Beta of B × (1 + DEA × (1 − Tax RateA))
Pure play foundriesEdit
Pure play foundries, such as TSMC and GlobalFoundries, have no in-house design capabilities, and fabricate integrated circuits (ICs) for fabless semiconductor companies, such as Qualcomm, Broadcom, Xilinx, Nvidia, among others. Integrated device manufacturer (IDM) foundries, such as IBM, NEC, Texas Instruments and Samsung, provide both foundry design services and IC fabrication.
Pure play E-retailersEdit
Compared to traditional retail stores, pure play e-retailers can serve a wider audiences without physical boundaries and distance. Pure play e-retailers target specific customer groups without the high cost of obtaining information from these groups.
Compared to companies that integrate both offline and online, pure online internet retails do not have brand recognition and reputation at the start-up stage so it lacks customer bases. In addition, pure plays' customers are unable to touch, examine and test real products before buying them. Furthermore, online shopping experience lacks human contact with consumers which is considered as an effective way to respond to questions, provide professional advice and motivate purchases.
Pure play gets physicalEdit
Beginning in 2015, Amazon.com customers in mainland UK with pickup codes can get the order at collection lockers distributed in shopping centers and commercial blocks. Amazon also opened its first physical stores at Purdue University campus in Indiana in 2015.
Ocado launched a virtual shopping wall at One New Change, Birmingham's Bullring shopping center and Bristol. Customers can shop by using Ocado's “on the go” app to scan product's barcode on the wall.
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