- The Washington Times - Friday, October 6, 2000

Priceline is shutting down its name-your-own-price groceries and gasoline programs, the company said yesterday.
WebHouse Club, a privately held licensee of Norwalk, Conn.-based Priceline.com Inc. that offered the discount services, announced that it cannot raise the money that it needs to grow.
Perfect Yardsale Inc., another Priceline licensee that sold merchandise through the Web site, also said it was closing. Both will shut down over the next three months.
"This is a capital markets concern they simply cannot raise the money necessary for them to reach profitability within the time frame that they had said," said Brian Elk, a spokesman for Priceline.
Although closing the WebHouse and Perfect Yardsale subsidiaries does not hurt Priceline directly, it damages the Priceline brand and questions the viability of the company's other ventures, analysts said.
"They've talked about initiatives into telecommunications, not only for long distance, but now they are talking about the wireless side, and financial services," said Louis Amoroso, an analyst with Jeffries & Companies in New York. "The question now is the viability of the model in those other niches."
Shares of Priceline dropped 40 percent yesterday on the Nasdaq Composite Index, closing at $5.81. It has fallen 95 percent from its 52-week high of $104.25 in mid-March.
Priceline will return to its original core business of allowing consumers to bid for services like airline tickets and hotel rooms, Mr. Elk said.
The company, whose pitchman is William Shatner, has added eight services to its original airline-bidding program.
"It means nothing to our other services," Mr. Elk said. "You won't have grocery and gas, but you still have airline tickets, rental cars, hotel rooms, home mortgages, new cars, long-distance telephone calling. We are also still supporting out initiatives in Australia, Asia, Europe, Japan, and we are also expanding into business-to-business services and insurance."
Priceline last week announced that third-quarter earnings would be lower than expected. The news wasn't good, but it could have been worse because the company is close to breaking even, said Tim Albright, an analyst with Salomon, Smith, Barney in New York.
For the second quarter ending June 30, Priceline's revenue rose 216 percent to $352.1 million from $111.6 million a year earlier. During the same period, its net losses fell 769 percent to $1.6 million from $13.9 million.
For 1999, net sales soared to $482.41 million from $35.24 million in 1998. At the same time, its net losses skyrocketed to $1.1 billion from $112.24 million.
Priceline spent many months and many dollars promoting the discount gas and grocery programs. WebHouse Club said about 2 million people used the services at some 7,200 grocery stores and 6,000 gas stations throughout the nation.
But many customers found the service cumbersome to use and gave up after trying it out.
Locally, most grocery chains used Priceline's name-your-own-price service.
"It was largely a novelty for our consumers, and novelty wears off," said Craig Muckle, a spokesman for Safeway. "I guess it just sort of ran its course."
Safeway has 124 stores in the Washington area, all of which offered the program. But Mr. Muckle said more people used it when it was first started in April.
"There was a group of people that used it often times," he said. "It seemed they were people who were either quite familiar with Priceline through their other opportunities, or people who by their professions would spend a lot of time on the computer."
The Washington area was one of the top markets for the gas and grocery program, the company said this past summer. Since most grocery stores including Safeway and Giant used Priceline, consumers didn't have to go out of their way to get cheaper foods and personal items.
But with the gas program, customers sometimes had to drive to another city or county to get the cheaper gas. However, there were neighborhoods with as many as a dozen participating gas stations.
Close to $400 million was invested in WebHouse Club, most of which is now gone. The company still has about $70 million, which it will use to refund its customers.
Customers with unredeemed grocery or gas credits will be refunded and given additional money to cover the savings they were expecting to receive, the company said. Customers were being notified of the move by e-mail, and refunds will be processed by Oct. 20.
The news of the two Priceline subsidiaries' closure hurt other companies that offer services to consumers on line. Shares of Amazon.com, for example, fell 7 percent yesterday, or $2.44, to close at $33.56 on Nasdaq.
"Some people feel [Priceline] is not going to be able to grow as they had then envisioned," Mr. Amoroso said. "That's definitely had an effect on other business-to-consumer markets today."
Analysts said that they would not have predicted WebHouse Club would come to this end at least not so quickly. There were rumors of layoffs, but nothing serious, Mr. Albright said.
"They are closing because the consumer package goods and fuel companies did not want to underwrite the coupons that WebHouse was giving consumers," he said. "So in a way it's a victim of its own marketing success the more volume they got the more money they lost."
Priceline is expected to give analysts and investors an internal review of all of its ventures during a conference call Nov. 2.

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