Priceline.com has stopped selling cheap gasoline over the Internet.
After a promising start, gasoline.com closed with the rest of Priceline.com’s Webhouse Club affiliate. At its launch, it seemed to be capturing the rise in online consumerism. Savings of 15-20 cents per gallon attracted 100,000 private motorists during the first month of operation. They bought over two million gallons of fuel. Over a million customers were signed up to the service and due to be given Webhouse cards by September, so total sales were predicted to rise dramatically during the second half of 2000. With five million cardholders expected by the end of the year, the future for online fuel sales in the US looked bright.
However, the added investment required by WebHouse to expand the service was too much for investors to bear amid falling profits and share price. The major investments needed were in the grocery offering which required a network of 80,000 cash registers costing almost $500 million to build. With investors’ confidence low for dotcom stocks, the extra funds required were not forthcoming and Jay Walker, Priceline’s founder, had to close down the WebHouse venture. The company still believes the concept was viable. Two million customers signed up to the grocery service, so it seemed to be in a good position – but without cash flow it could not survive.
There is still some optimism regarding selling fuel over the web, since the gasoline-retailing venture was essentially a victim of failures elsewhere within Priceline. Other companies may be incentivized by Priceline.com’s early success. Across the Atlantic, high taxation on road fuel has encouraged ‘dump-the-pump’ campaigns and refinery blockades across Europe over the summer. This means that a gasoline discount service in this region could have huge potential given consumers’ price sensitivity. It will be a challenge for Webhouse Club’s successors to secure significant discounts in the low margin and high tax regimes of Europe. But Webhouse’s failure certainly does not mark the end of the online fuel retailer.
