Online auctioneer Onsale Inc is quickly repositioning itself for the retail service business rather than the product business, with initiatives such as its Onsale Atcost online computer buying business. After three weeks of operations, the company claims Atcost sales now represent 22% of its sales. It believes the future of e-commerce is in service business, not product business. So how does it make money when it passes the wholesale cost it gets directly to the consumer? It gets a transaction fee (between $5 and $10), a credit card processing fee (2.4%), volume rebates, some advantageous shipping costs, advertising revenue, and market development funds from vendors (another way to say advertising). The cost of adding incremental transactions is very small, it claims. The company says Atcost’s average order size is more than 50% greater than the size of its traditional auction order with only some limited cannibalization. It is attractive because it has been able to get prices down to somewhere between 10% to 12% below those at CompUSA. It is looking for additional distribution partnerships in home entertainment and other markets as well as international opportunities. It already claims to be the leader in web-based sales of discount consumer electronics and sporting goods and the second largest seller of cruises behind American Express in its traditional Atauction service. In the fourth quarter the auction site got 139,000 hits per day compared with 114,000 in the third quarter, up 22%. It claims to have had 2 million unique visitors in December. Its proprietary Java-based Bidwatch program which users can download and does not count in its hitcount is claimed to account for 10% of all hits now. It says 1.4 million users are now registered to bid. The average spend is $750, its top 10% of customers spent $4,000. Average sale in the fourth quarter was $190 down from $193 in the holiday buying period.
