Onsale Inc is looking to differentiate itself from the increasingly-crowded web auction space and has launched a new web-based service to offer new computer products to consumers at guaranteed wholesale prices. The Menlo Park, California-based company has got PricewaterhouseCoopers to certify that the prices are cost prices and Onsale will add a transaction fee of up to $10 per item, while the other charges, mainly credit card and shipping, will be passed on to the consumer at cost. Onsale says the transaction fee will be less than a retail markup and it will make almost nothing on the transactions. Its money will come from advertising and what it calls marketing co-op funds, whereby the computer manufacturers and Onsale will establish joint funds for marketing the products. Moving away from a total reliance on surplus goods to sell through its auction site would seem to be key to the company’s future success, judging by the preliminary fourth quarter numbers it also released yesterday. It says revenues are expected to be about $59m for the quarter, a slight rise from the $57.8m in the third quarter. And as a result of purchasing the items for sale in the new atCost service, Onsale says its margins in the fourth quarter will be about 8.5% to 9%, down from the 10.7% gross margin it enjoyed in the third quarter, but this will be offset by lower than anticipated operating costs. As a result of all that Onsale says its loss per share will be between 15 cents and 17 cents for the fourth quarter and it will report full numbers on February 10. First Call’s average of analysts estimates was for losses of 16 cents per share, so it will not be a surprise. Nevertheless, the markets were not impressed by the small growth in revenues and lower margins. Onsale’s shares closed down $8.1875, or 14.0% at $50.25 on a day that saw the other web commerce share prices rise. Onsale points out that its auction sales are not seasonal in the traditional retail sense, in fact they are pretty much the opposite. For example, the fourth quarter can be slow for Onsale because manufacturers have less surplus goods to sell, and any they do have they will try and sell themselves. The first quarter, however, is often fairly strong for surplus auctions. When potential buyers request an item, they will be sent a pro- forma invoice that lists the cost of the items, Onsale’s processing fee of $10 or less, payment processing charges and shipping fees. Customers can check the status of the orders over the web and find out when the credit card was charged. CyberCash’s distribution partner is TechData and the manufacturers featured include IBM, HP, Toshiba, Compaq, NEC, Iomega and Nokia, among others.
