|The Price Is Right for Priceline But Not WebHouse|
|Subject||Losses and shutdown condition|
|Topic||Production and Costs|
|Key Words||Consumers, bid, cost, subsidy, profitability, sales, subsidiary, coupons, market, manufacturers|
Priceline.com allows consumers to bid for airline tickets, among other things. If the bid is accepted, the consumer is obliged to accept the itinerary and airline. Initially, the founder subsidized tickets, selling them below cost, in order to attract consumers. Later, the major airlines joined his system. The company is now headed toward profitability.
The same idea has been applied to sales of groceries by WebHouse, an independent subsidiary of Priceline. Consumers could bid on more than 200 grocery items, but could not specify the brand. They could then use a special identification card to pick up the groceries at any of thousands of supermarkets. Although it was similar to offering coupons to a limited part of the market, manufacturers were slow to participate. The company therefore had to subsidize purchases. It also faced costs of half a billion dollars to build a network connecting 80,000 cash registers. Now, WebHouse is shutting down because it cannot raise enough money to continue.
(Updated November 1, 2000)
|Source||Saul Hansell, "Priceline's WebHouse Club Abandoned as Investors Balk," The New York Times, October 6, 2000.|
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