By Leslie Walker
Washington Post Staff Writer
Thursday, March 11, 1999; Page E1
Coming soon to an Internet screen near you, it's "The Price Is Dropping" – or maybe "Your Personal Price Club." Accompany Inc.'s new online buying service feels like a combination game show and big-box buying club, but it is unlike anything you've seen. Instead of making consumers compete, as they do in auctions, Accompany allows them to cooperate by negotiating volume discounts on their behalf. Prices drop as more buyers sign up.
The live format is gimmicky, the core concept unproven, the staffing a mere 10 people, and the marketing plan limited by company finances – $500,000 in privately raised capital.
So why should we pay attention?
Because I believe you can glimpse the future of retailing in this San Francisco start-up. Regardless of whether its novel format succeeds after it debuts on the Web next week, Accompany's vision of creating on-the-fly consumer cooperatives is likely to trigger similar experiments. I wouldn't be surprised to see the successful ones diverting sales from regular stores in a big way.
Accompany's three young founders envision a day when consumer goods can be priced dynamically through Web-based systems that mimic the New York Stock Exchange. "In the same way the stock market is focused on selling and buying pieces of a company, we are focused on the buying and selling of consumer demand and putting it together to create a market," said Accompany's chief executive, Jim Rose.
He's all of 25, but don't let that fool you – he is brimming with business sense and an intuitive grasp of what the global computer network can do.
How will it work? Say you want a Palm Pilot. You go to www.accompany.com and find a "buy cycle" for a particular model. That's what Accompany calls the period of time an item is offered, and it's illustrated with a graphic showing the current number of committed buyers, the schedule of discounts that will kick in as more people join the group, and the time remaining.
The Palm V, for example, typically retails for $449. Accompany promises its starting prices will be lower because the company has pledged to take no markup on the wholesale prices its distributors charge. So the starting price might be $395, then drop to $365 when 26 buyers have signed up, and to $320 when the pool of buyers reaches 200.
No matter where the price is when someone signs up, all buyers pay the price reached at the close of the cycle, which cannot be higher but might be lower. People can jump in early but signal that they are willing to buy only if the price drops to a certain level, mimicking "limit" orders in the stock market.
Accompany's livelihood depends on scale. It needs millions of buyers to succeed. The service will charge buyers a $10 transaction fee for each purchase, making it economical only for goods costing over $100. To jump-start each cycle, Accompany will waive the $10 fee for the first people to order.
The service plans to launch with 50 or fewer items for sale, all of them popular computer hardware and software in the latest versions. Since Accompany doesn't handle the products themselves (they are to be shipped directly to the buyers by distributor Tech Data Corp.), its economic model resembles that of Internet auctioneer eBay, which has reaped gross profit margins of more than 80 percent largely by not handling products. Like eBay, Accompany sees its mission as creating an environment that builds "community" around consumers while changing their buying behavior.
The live format may appeal to bargain lovers who relish the gamesmanship of a price hunt. Accompany offers them a "word of mouse" button to generate e-mail inviting friends and colleagues to join a cycle. As the cycle heats up, Accompany will also place banner ads on other Web sites enticing people to participate and drive the price down further.
There will be many hurdles. One is unfamiliarity. "This really does represent a new way of buying for people," says Bruce D. Temkin, an Internet analyst for Forrester Research. "People have always sold on consignment; this is almost like buying on consignment."
Rose, however, believes his concept will click because it is not entirely new. It mimics corporate procurement practices in which major suppliers lower their prices in return for guaranteed sales volume. Rose hopes to give consumers and small businesses the same economic advantages enjoyed by Fortune 500 companies.
The only thing vaguely like it on the Internet is Priceline.com's quirky service in which people name the price they are willing to pay for airline tickets or cars, and Priceline tries to match them with a seller. Unlike Accompany, though, Priceline makes no attempt at banding consumers together.
Temkin believes Accompany is taking a creative stab at the future: "At Forrester, we believe the future is all about dynamic trade. One of the keys to dynamic trade is pricing that matches market conditions, which is exactly what they are doing."
Economists say the Internet, with its instantaneous communication ability, is creating more efficient markets in which suppliers save money by gauging demand better and sending to market only the number of products that can be sold.
This helps companies avoid under-pricing products based on predicted sales volumes that fall short. In that context, you can think of Accompany as a pricing system, not a retailer. And while Accompany will start with pre-negotiated price declines, it hopes to make price negotiation a live process eventually.
Accompany is only one example of the incredible creativity being applied to reinventing retail on the Web these days. With so much energy going in, look for some bizarre electronic cousins to be joining the company on your screen any day now.
Send e-mail to Leslie Walker at email@example.com.
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