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Net Prophet - by Dylan Tweney

April 19, 1999

Consumers, unite! Use the Net to drive down prices of goods

As anyone who's recently bought gasoline in California knows all too well, prices for most products tend to rise quickly, but fall slowly. An oil refinery explosion squeezes the wholesale gas supply, and prices at the pump rise overnight: the law of supply and demand in action.

A similar phenomenon happens in online auctions, which are a dream come true for sellers, but a dangerous game for buyers. Anyone who's ever placed a bid on eBay at what seemed like a reasonable price, only to watch the price rise rapidly beyond reach, knows what I'm talking about.

On eBay, many of the items sold are one of a kind -- in other words, they're in very short supply. Combine that with the "auction fever" that grips bidders in the last few minutes of an auction, and you've got a perfect recipe for driving prices sky high.

But what if you could harness the collaborative power of the Internet to drive prices down, rather than up?

That's the idea behind Accompany, a start-up that just began doing business this month, at www.accompany.com. Accompany builds ad hoc blocs of buyers who team up to secure volume discounts on products.

The process works something like an online auction in reverse. When you see a product you would like to buy on the Accompany site, you click a button, enter your credit card number, and agree to purchase it at the currently listed price.

But here's where it gets interesting. The more people who sign up, the lower the price gets for everyone, including those who signed on earlier. For each product offered, Accompany has already negotiated volume discounts in several tiers -- a process that should be familiar to most people in corporate IT departments. As the pool of buyers increases in size, it commands more favorable discounts.

Depending on how many people agree to buy a product, you could wind up paying significantly less than the price displayed at the time you signed on. And instead of watching the price rise, as you do at auction sites, you get to watch the price fall -- a much more pleasant experience.

Accompany closes the buy cycle for a particular product at a specified point in time, or when they've sold out. Then they place the order and bill the buyers. The supplier packs the items up and ships them directly to the individual consumers.

The site went into business on April 7 by offering the stylish and generally overpriced Palm V. Within 7 hours, Accompany had sold its entire stock of 50, at $350 each -- or approximately $100 less than the retail price.

Accompany makes money by charging a transaction fee to buyers. And it encourages customers to recruit their friends, family, and associates -- which significantly cuts the company's customer acquisition costs.

The only catch is that the vendors must be willing to play ball. The response has been mixed, Accompany co-founder and CEO Jim Rose told me, with high-tech companies generally more willing to experiment with this new form of sales than other industries.

If Accompany succeeds in collecting a large enough market of buyers, however, it will be impossible for merchants to ignore them. When that happens, Accompany will have truly succeeded in empowering customers by connecting them with one another.

And that, rather than noisy chat rooms and cluttered bulletin boards, is what an online community is all about.

Are you ready for your customers to organize themselves? Write to me at dylan@infoworld.com.

Dylan Tweney is the content development manager for InfoWorld Electric. He has been writing about the Internet since 1993.

Previous columns by Dylan Tweney

Companies get a clue about the Net: It's not just business as usual
April 12, 1999

A swarm of WASPs will add to the buzz on the business Net
April 5, 1999

Don't be a slow poke: Keep your site up to speed or lose visitors
March 22, 1999

Microsoft takes aim at language barriers to business information
March 15, 1999

Every column since August, 1997

Please direct your comments to InfoWorld Electric.

Copyright © 1999 InfoWorld Media Group Inc.

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