Gas, Grocery WebHouse Runs Out of Capital

WebHouse Club, a licensee of Priceline.com Inc. offering name-your-price service for gasoline and groceries, will go out of business in 90 days.

The Greenwich, Conn.-based company said it wasn't likely to raise the necessary capital to keep its business going and achieve profitability. Its cash reserves, which total approximately $50 million, and an additional $20 million of working capital will be "more than sufficient to satisfy all obligations to customers, employees and suppliers," WebHouse Club said in a statement.

Customer service at WebHouse will remain fully operational until the company shuts down, the statement said. All customers with unredeemed gas and grocery purchases will receive a full refund of any prepaid amount and extra money to cover the estimated savings for gas and groceries.

"In scale and scope, the WebHouse Club was a business opportunity with great potential but with real risks," said Jay Walker, founder of Priceline and WebHouse, in a published statement. "Specifically, it required a large capital commitment to create a national network of retail gas and grocery stores, broad participation by packaged-goods manufacturers and third-party marketing partners and substantial information technology systems." Walker also said WebHouse Club's executive team concluded that more capital wouldn't be raised because of the weakness in the current capital-market environment.

WebHouse Club served 2 million grocery and gasoline customers; 7,200 grocery stores; 6,000 gas stations; and approximately 125 consumer packaged goods manufacturers.

Rob Leathern, an analyst at Jupiter Communications Inc. in New York, said Wall Street hasn't been very tolerant to allow start-up online businesses to build from their core.

"It didn't offer a value proposition to consumers and manufacturers," said Rob Rubin, an analyst at Forrester Research Inc. in Cambridge, Mass. Consumers would save money initially, but save less the more they used WebHouse Club, he said. Additionally, the service pushed consumers to buy products from manufacturers it made deals with for 80% of volume, Rubin said.

Goods manufacturers didn't buy into the service because consumers were purchasing products based on price, not brand, Rubin said.

WebHouse Club didn't return calls by press time.

The bad news continued for Norwalk, Conn.-based Priceline today. It said another affiliate, Perfect YardSale Inc., ceased operations. Perfect YardSale offered used merchandise to consumers through Priceline's Web site.

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