Working the Web Bazaar

SAN FRANCISCO (03/20/2000) - Rolando Zamora loves to travel. But like many people, the control systems engineer from Wilmington, Delaware, couldn't afford luxury accommodations or the high price of last-minute plane tickets. All that changed when he discovered Priceline.com Inc., an innovative service that lets travelers name their price on hotel rooms and airline tickets. Now Zamora routinely stays in four-star hotels at discounted rates that don't strain his budget. And as for those impulse trips--well, let's just say he's always got a bag packed.

Zamora, like many other bargain-conscious shoppers, has discovered the next wave in online shopping: dynamic-pricing sites. This new breed of Web merchant can be divided into three categories. First, name-your-price sites, such as Priceline.com and a section of Expedia.com, let shoppers specify how much they're willing to pay for an item or service in the hopes that participating businesses (airlines, car dealers, hotels, and the like) will take them up on their offer. In another category, reverse-auction sites, like NexTag.com and BuyersEdge.com, combine features similar to those of shopping bots (software agents that prowl the Web in search of big bargains) with the price-matching service of the name-your-price sites. And finally, group-buying sites, such as Accompany.com, C-Tribe.com, and Mercata.com lure buyers with the premise that the price of a product will drop as the number of purchasers for that item increases.

Sound complicated? It can be, says Rebecca Nidositko, analyst with the Yankee Group. Unlike with traditional online shopping, whose mechanics don't vary much from one Web site to the next, each dynamic-pricing site seems to have established a different set of rules for shoppers to contend with, and various hidden catches in pricing, ordering, and service policies can make this kind of shopping a challenge. "There's a huge usability issue with these sites," Nidositko adds, noting that many consumers prefer the ease and speed of a more typical, fixed-price Web retailer, even if that option means paying a little more.

Dynamic-pricing sites sell a wide variety of goods and services. You can book airline tickets, reserve hotel rooms, buy video games for your kids, or pick up home electronics, computer hardware and software, small appliances, groceries, jewelry, and even automobiles. Although each type of Web site offers the potential for big savings, deep discounts are by no means guaranteed. In our own shopping experience, as well as through interviews with several consumers, we found some amazing deals--from Zamora's $80 room at the fancy Fairmont Hotel in Chicago, where a room will generally go for $159 and upwards a night, to home electronics devices and computer equipment at prices well below retail.

But we also talked to consumers who had discovered that their great deal was no bargain after all--they either wound up paying too much, or realized late in the process that the item they had ordered was out-of-stock or had been discontinued.

How can you ensure that you'll end up on the winning side of the equation? In a word, research. That means calling your local retail stores to find out current prices, scouring the Web to stay abreast of the best deals, and then waiting--sometimes for days or even weeks--until you've found the item or the service you're looking for at a price you're willing to pay. If you're too eager to wait or too busy to do some homework, these new dynamic-pricing sites are probably not for you.

Name-Your-Price Sites You Call the ShotsOf all the dymanic-pricing models, none offer a higher potential for savings--or have more restrictions--than name-your-price sites. Priceline.com started the revolution in 1998 when it began offering low-cost airline tickets for travelers willing to sacrifice choice, convenience, and frequent flyer miles in exchange for big discounts on published airfares. Since that time, the site has added hotel rooms, groceries, home financing, and cars (for sale or for rent) to its mix. Long-distance phone service is planned for later this year. In late 1999 Expedia.com jumped on the name-your-price bandwagon, prompting a patent infringement suit by Priceline that was still in court at press time. Like Priceline, Expedia offers airline and hotel discounts for savvy travelers, but Expedia's price-matching service covers hotels in only 16 U.S. cities compared with Priceline's coast-to-coast service.

How They Work

Although both of these services have their own quirks, each lets you name the price you want to pay for a hotel room or an airline ticket. Then, depending on availability, the site's highly automated database system responds with either a match or a denial. Priceline and Expedia don't always directly contact partner airlines or hotels to generate a response to each new bid. Each site uses predetermined rules governing availability, rate structures, and other factors.

Like most bargains, these discounts involve some important trade-offs: Although you can specify the dates you want to travel and your departure and arrival cities, you can't pick the time of day or the airline. You also must agree to at least one stopover during each leg of a round trip. Similarly, with accommodations you can't pick the hotel chain you want to stay in. Instead, you simply provide the dates of your stay, the general location, the number of rooms you want, and the class of hotel.

Airline and hotel reservations are nonrefundable and nonchangeable. And you must bid carefully, since you're allowed only one hotel request per trip--unless you'll change your criteria and, say, expand the general area you're willing to stay in or agree to a lesser hotel. Airline bids are slightly less restrictive--you can resubmit a bid for the same trip after seven days.

Assuming you can live within these confines, the bidding and buying process is relatively straightforward. Once you place a bid, the site gets back to you with a confirmation or denial. Expedia responds on-screen almost immediately; Priceline e-mails you within an hour of the time you made your request. If your bid is confirmed, the service makes the reservation and charges your credit card for the ticket or room.

Cheap Fares, No Choices

Sheryl Mexic, founder and administrator of the Priceline and Expedia Bidding board on EZboard (pub4.ezboard.com/bpricelineandexpediabidding.html), has used both Expedia's and Priceline's name-your-price services. She swears by these Web- site services when it comes to booking luxury hotels for family, friends, and coworkers but cautions that the sites can be impractical for booking work-related flights.

"I can't imagine any business using a name-your-price service for airline travel," says Mexic, who answers dozens of queries a week from hopeful bidders looking for tips and tricks. "[Business travelers] need control over arrival and departure times and to be able to make changes in reservations," she adds--options that Priceline and Expedia don't offer.

The same restrictions that make the airline discounts inappropriate for business travelers can also make quick weekend getaways impractical and inconvenient. Since the ticket that you wind up with could put you on a plane anytime between 6 a.m. and 10 p.m., that weekend trip could require a late-evening departure on Friday and an early-morning return on Sunday, leaving you with little more than a single day to spend at your intended destination.

And even some typical, relatively uncomplicated itineraries are out of the question, as we discovered when we attempted to book a vacation flight from San Francisco to Barcelona with a one-week layover in London. It turns out that both Priceline and Expedia can book only round-trip single-destination tickets--a limitation that makes their services useless for any journey that involves a visit or two along the way.

Should you consider using Expedia or Priceline to book your airline travel reservations? Yes, as long as your travel schedule is flexible enough to accommodate a wide range of possible departure and arrival times, or if you find you have to make travel plans at the last minute and would otherwise be forced to pay an exorbitant price for the privilege of booking a flight at short notice.

Rolando Zamora has used Priceline's service several times--once, for example, to book a vacation to Calgary, Alberta, and twice for spur-of-the-moment getaways. In each instance, he snagged his last-minute tickets for the same price he would have paid if he'd bought it a month in advance. One last-minute airfare, from Philadelphia to Kansas City, Missouri, cost him just $240 on Priceline, compared with the $800 he would have had to pay most other airlines directly for the same trip. His Calgary fare was equally impressive: $300 for a round trip from Philadelphia (including all fees and taxes), compared with the $600 fares he saw advertised elsewhere. The one catch: Zamora wound up with an afternoon cross-country flight that touched down in Calgary at 9:30 at night.

"The whole day was shot," says Zamora; he would have preferred a morning flight that gave him more time to enjoy his stay in Calgary.

Luxury Hotels At Motel Prices

Both Zamora and Mexic say that the real value of name-your-price sites is that they allow you to book reservations in top hotels, including such well-known chains as Fairmont, Sheraton, and Westin, for a fraction of the price that you'd pay through a travel agent or by booking direct. Consider recently available bargains like a room in the Sheraton Russell in midtown Manhattan for $80 a night, a night at a beachfront hotel in San Diego for $50, and a weekend stay at the former Ritz-Carlton in Houston for a reasonable price of $100.

"Without a doubt, [these sites are] the best deal around for getting four-star hotel rooms at discounted prices," says Mexic. Both Mexic and Zamora have encountered one problem with their bookings, though: Hotels did not always have a record that a room was paid for--even though the credit card was charged at the time of the booking. In the past, Mexic and Zamora have had to make duplicate payments on their rooms, then phone Priceline to sort things out.

However, this problem seems to have been resolved in recent months, say Mexic and Zamora.

Buoyed by the prospect of huge savings, we decided to use Priceline and Expedia to nab discount hotel reservations for a trip to Seattle. We knew that rooms in four-star downtown hotels ran $150 to $300 a night. We tried Priceline first, entering arrival and departure dates, room requirements, and credit card info.

Our bid: $50 per night for a luxury hotel. Minutes later an e-mail advised us that we had no takers on our offer. Undaunted, we tried the same bid at Expedia. In a few seconds, a message popped up on screen saying our offer was denied again. We bumped our bid up to $75 and added the nearby Bellevue/Redmond area. Again, no luck at either site. Finally, we expanded our criteria to include three-star hotels, keeping our bid at $75.

Bingo. The system came back with news that our latest offer had been accepted.

We were the proud owners of reservations at the Holiday Inn Express in downtown Seattle. Not exactly a four-star establishment, but we saved $24 off the lowest price that the hotel had to offer (including an American Automobile Association discount) when we called directly.

Trains, Planes, And Even Automobiles

Although most consumers who use price-matching services are looking for hotel rooms and airline tickets, Priceline also lets you name your price for groceries, cars, home loans, and by the time you read this, it plans to be selling gasoline. Like accommodations and air travel, these categories have their own restrictions that limit the usefulness of the name-your-price option.

Once a dealer accepts your bid on a new car, for example, you have 14 days to finalize the sale with that dealer, or pay a $200 service charge to Priceline.

The bottom line: Read the rules carefully, and do your homework before placing a bid.

A relatively new Web site, Ebix.com, has begun offering a name-your-price service for all types of insurance. Ebix lets users specify the type of insurance they're looking for, from auto insurance to health coverage (with specifics about deductibles, number of people to be covered, and other important details) and state the amount they're willing to pay for premiums.

Insurance agents then bid on the policy. Unlike with hotel and airline reservations, however, there's a fair amount of back-and-forth between the consumer and the insurance agent before a policy is agreed upon.

High-Tech Want Ads

Gezerk (a screen name) is looking for a pair of tickets to the Champions on Ice performance at the Centerplex in Macon, Georgia. Fendes wants an 8mm reel-to-reel movie projector. Capco is hoping to find a couple of investors for his Internet start-up.

What do these three consumers have in common? They all posted their want ads on IWant.com. This and similar sites, such as EWanted.com, work much like high-tech versions of the classified ads. Shoppers post the items or services that they're interested in acquiring, then sellers respond with their offers (unlike at an online auction, where buyers compete against one another to purchase a particular item). Although IWant.com and EWanted.com both focus on person-to-person transactions, small businesses typically mix it up as well--much as happens at online auctions.

Finding Rare Goods

Unlike other dynamic-pricing sites, IWant and EWanted are best suited for finding collectibles or other elusive items, such as coveted concert tickets or a mint 1965 Camaro. Here's how it works: Consumers post a want ad describing the item they're looking for and, if they choose, divulging how much they are willing to spend. They then decide how long to keep their request posted--from a couple of days to several months. Offers that come in are forwarded to the buyer via e-mail or can be reviewed on the Web site.

All participants remain anonymous until a buyer initiates contact with a seller--an important feature to help buyers avoid being deluged by seller queries or winding up in the marketing databases of dozens of companies. Buyers can negotiate directly with one or more sellers or keep the want ad open until a better offer comes along. At IWant only the buyer can review offers, whereas EWanted lists all offers alongside the original ad--a nice feature, since it encourages a little friendly competition among sellers interested in capturing the business.

Getting Your Stuff

Like auction sites, IWant and EWanted serve only as intermediaries between buyers and sellers. It's up to the two parties involved to negotiate price and arrange delivery and payment. Neither site offers an escrow service, but an EWanted feature enables members to rate buyers and sellers with whom they've done business. As is the case at many auction sites, all sales are final.

The services are currently free to buyers, but both of these sites hint that they may charge a service commission down the road. IWant currently charges a fee for sellers.

Reverse Auctions

Negotiate Yourself a Bargain

Wouldn't it be great if you could haggle with Web stores the way you bargain with merchants at a swap meet? That's the concept behind reverse-auction sites like BuyersEdge.com, MyGeek.com, NexTag.com, and others. In this category, shoppers put their product and pricing knowledge to work by bargaining for a wide variety of consumer goods with multiple online sellers.

Sites in this arena vary widely in product selection and in the negotiating and buying process. At NexTag, you submit a query about the product you're interested in purchasing, and NexTag returns a list of merchants selling the product, along with the price they're offering. With NexTag acting as the intermediary, you then have the opportunity to counter with a lower price in the hopes that an inventory glut or other business dynamic (such as the introduction of a new product model) will prompt one or more merchants to drop their price. Vendors may match your price, meet you part way, or stay put.

Responses are almost immediate--you offer a price, and up pops a list of vendor responses.

Get To Know The Supplier

Each of these sites maintains relationships with a variety of merchants. The list of participating sellers is still relatively short, however, a factor that can limit your savings. At NexTag, for example, only three booksellers--1BookStreet, A1Books.com, and AlphaCraze.com--have signed on. The best deal we could get on a copy of Barbara Kingsolver's The Poisonwood Bible was $14, including shipping. Borders.com and Amazon, in contrast, were selling the book for $11, including shipping--no haggling required.

We had much better luck when we went to NexTag in search of a SmartMedia memory card for an MP3 player. The card was selling for about $100 at real-world retailers, slightly less at traditional Web stores. We went to NexTag to see if we could strike a better deal. Our search turned up several vendors offering the product for about $80, including tax and shipping. We fired back with an offer of $55--not expecting any takers. Our hunch was right, but one online merchant, Sparco, came back with an all-inclusive offer of $70. Though other merchants had negligibly lower prices, we chose Sparco because other shoppers were saying that it has a good reputation for service, and NexTag said Sparco had the item in stock.

However, shortly after we finalized the sale, we checked the status of our NexTag order and discovered the SmartMedia card was now listed as out of stock.

We tried contacting Sparco at the e-mail address listed in NexTag's help section, but the message bounced back. We contacted NexTag's customer service department by e-mail and got an unhelpful response. Finally, we went to the Sparco site directly and e-mailed customer support (we couldn't use Sparco's tracking feature, since we had no account name or password). Although you can go to Sparco's in-stock indicator, NexTag's in-stock indicator for Sparco doesn't operate in real time, so a product may briefly be listed as available even after the stock is depleted. The card arrived ten days after we placed the order.

Other Ways To Haggle

Other sites in the reverse-auction category, including BuyersEdge.com, MyGeek.com, Respond.com, and CarPrices.com, streamline negotiations.

(CarPrices.com is currently available only in San Diego, although it will be offered nationwide later this year.) Instead of first displaying a list of vendors' prices, they let you begin the process by saying how much you're willing to pay for an item; then they get back to you with a list of merchants who've responded to the request. Buyers can specify whether they want information from all merchants or just those who can match the price.

Some of these sites respond immediately to offers, while others may take several days. In almost every case, you can either have the site e-mail you each time a merchant responds to your offer, or view a summary of the counteroffers. In one instance we found a great deal on a portable CD player through BuyersEdge (matching our $129 requested price); the seller was a small East Coast retailer we had never heard of, so we ended up not buying the product. If you are looking for hard-to-find merchandise, such as a 1965 Mustang or an original Batman lunch box in mint condition, both Respond and MyGeek specialize in obscure and collectible goods but don't excel at lining you up with commodities, like palmtops.

Unlike group-buying sites, where every participant gets the same price on an item, bidders operate in a vacuum at reverse auctions. Two different buyers may purchase the same product on the same day from the same merchant and pay two different prices. To make sure you get the lowest price possible, investigate what the product is selling for on the Web and in retail stores. Remember that under the law of demand, the most popular items are typically not discounted.

And finally, don't be afraid to log off if merchants aren't willing to deal.

Group Buying Sites

The Lure of the Volume Discount

If you like the thrill of online auctions, you'll love group-buying sites like Accompany, C-Tribe, Mercata, and others. Although the products and rules vary, each site's premise is the same: The greater the number of people who buy a particular product, the greater the discount.

Mercata and Accompany, the two most-established sites in this category, boast the largest selection of merchandise and the greatest number of buyers--the component critical to making this model work. As with auction sites, a new selection of products goes on sale every day, with buying cycles (the length of time a product is available for purchase) lasting several hours to several days. Only when a significant number of people get in on the purchase does the price start to drop--sometimes a little, sometimes a lot.

Reeling You In

Although each site gives the impression that prices change dynamically based on the number of buyers, complex rules determine just how quickly (and how far) the price of a product will drop. At Accompany, the pricing schemes are spelled out so you know just how many buyers are needed to reach a certain savings level. On one of our visits, for example, we found a listing for a kit of travel accessories for a Palm V ($50 retail), which began its buying cycle at $43. We could see that 6 people had already signed up for the kit, bringing the price down to $38. The second drop (of $2) was scheduled to kick in after 21 people had signed on to purchase the product. At 41 buyers, the price would dip to $33. The more expensive the item, the greater the incremental savings.

At Mercata, buyers have no way of knowing when or how much the price of a product will drop. Instead of simply signing on to purchase an item, shoppers place bids--and Mercata must accept the bid before the price changes. There's not much chance that Mercata would accept a $10 bid on a $150 VCR, for example, so that bid would not change the price. A $140 bid, on the other hand, might well receive the green light, driving the price down for everyone, even those whose initial bid was higher.

After scouring the Web and calling local retail stores, Susan Mills of Florence County, South Carolina, wound up buying her Sharp 600U DVD/CD player at Mercata for $159--$60 less than the lowest price she had found anywhere else. She spotted the item as a Mercata Power Buy (the site's term for a featured product), and in less than a week she was munching popcorn and watching her first DVD movie. And Kevin Womack, a systems analyst at the University of South Florida in Tampa, bought a copy of NFL Blitz, a video game for the Sega Dreamcast, for just $6 from Accompany. The game retails for $50, though Womack had seen it selling elsewhere for as little as $30.

Timing Is Everything

Both Mills and Womack were lucky: They shopped at the right time and snagged items at bargain prices. Fortunately, Accompany can notify you when a price drops to your sweet spot. And you'll always get the final price--even if your bid was higher.

BazaarE.com, a smaller, newer group-buying site, lets shoppers post a notice indicating their interest in a specific product; other buyers join in to create a pool. When the pool closes, BazaarE's merchants (primarily small and midsize retail stores) bid on the business. Buyers can choose, individually, to go with the same merchant or different ones, or decide not to buy at all.

At MultiBuyer.com, the selection is small and the on-screen help is minimal, but a few deals are attracting plenty of attention. During our first visit to the site, hundreds of buyers were taking advantage of a $25 gift certificate for online merchant CDnow selling for $12.50. (On subsequent visits, however, the gift certificate offer was limited to first-time CDnow buyers.) Another nice feature: Buyers can change their mind and drop out of a group at any point before the buying cycle closes, usually seven days--an option not offered at Accompany or Mercata.

C-Tribe.com, another newcomer, features discounted gift certificates for a variety of retail chains, including KB Toys and Foot Locker, as well as restaurants such as Chili's. Depending on the number of buyers, discounts can be as deep as 20 percent. You can buy multiple certificates, so the potential savings are even greater. Unfortunately, certificates can be redeemed only at retail stores, not at their online counterparts--odd, given the venue in which they are being sold.

Simply put, using a group-buying site makes sense whenever you find goods or services you want at an attractive price. Featured products change daily, so there's no guarantee that a DVD player on sale one week will still be available the next, and best-sellers such as the Palm V are not always in stock. Return policies also vary considerably from one site to another, so read the fine print closely before you buy.

Hard Work, Big Savings

Smart traveler Zamora acknowledges the hurdles inherent in shopping at any of the new dynamic-pricing sites, but he says he's more than willing to make a few sacrifices and spend a little extra time learning the ropes if it means saving big money.

"Sure, there are some trade-offs," acknowledges Zamora. "But the savings are incredible." And for bargain-hungry consumers, that's what it's all about.

Roberta Furger is a contributing editor for PC World.

Tips & Tricks

Getting the Best Deals

Ready to shop at a group-buying site or name your price for a hotel or airline reservation? Here's what you need to know to strike the best deal online.

*Know your price. Don't place a bid or join a group buy without scouring Web merchants and calling retail stores for pricing and availability information.

Uninformed buyers could wind up overpaying.

*Research the merchant. Many sites are merely intermediaries between merchants and the consumer. Investigate the seller by visiting its Web site directly before you finalize a purchase. Pay close attention to the seller's policies on privacy and security.

*Read the fine print. Each merchant has its own unique set of rules and restrictions that can affect your purchase significantly. Taking the time to learn the ins and outs of a site can save you time and money in the buying process. Pay particular attention to return and refund policies, any added fees for using a site, and the point at which you're committed to a purchase.

*Play hardball. Priceline bounces back offers it deems too low to be accepted and encourages a bidder to enter a higher price. Don't be deterred from trying a low bid anyway, says Sheryl Mexic, founder and administrator of the Priceline and Expedia Bidding board on EZboard, noting she's had many seemingly unreasonable bids accepted.

*Go to the source. If you're in the market for a cheap airline ticket, visit several airlines' Web sites and sign up for their e-mail newsletters. Many of the airlines offer Internet-only specials that may yield greater savings--and more flexibility--than either Priceline or Expedia.

*Don't forget the extras. Take sales taxes, shipping, and hidden fees such as hotel taxes or airport fees into account. Some sites factor all these extras into their final pricing. Others leave it up to the buyer to do the math.

*Don't be greedy. Don't pass up a bargain at a Web store or forgo a discounted airfare in the hopes of getting a lowball bid accepted on a dynamic-pricing site. Snatch up deals wherever you find them--they may not come around again.

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