Priceline Pumps Its Gas Program

FRAMINGHAM (03/03/2000) - Priceline.com Inc.'s new program that will allow consumers to bid on gasoline prices is taking off on May 20 with or without the involvement of major oil companies, the Internet discounter said.

"We're certainly meeting with them, but we have nothing to report right now," said Robert Padgett, a spokesman for Priceline WebHouse Club, the affiliate of priceline.com that announced the program last week. "We could go ahead without them."

That's because most of the proposed consumer savings of 10 to 20 cents per gallon will be derived from ads on the gasoline page of the priceline.com Web site. Priceline will also work with individual gasoline retailers, which it expects will agree to shave 1 to 3 cents per gallon off gas prices, where they make very little profit.

In return, gas retailers expect Priceline to drive additional customer traffic their way, presumably to spend more on food and other items that deliver the bulk of their profits.

To date, Priceline has lined up more than 100 sponsors outside of the fuel industry who will offer consumers additional gas price credit in return for agreeing to try their products and services. Padgett declined to name any of the potential sponsors.

Here's how the new gas deal works: Before the program launches in May, consumers can apply for a Priceline gas card on the Web site. The company then forwards a list of local gas stations and the consumer preapproves three or more of them.

Once the program goes live, consumers will enter the site and name the per-gallon price they are willing to pay for self-service gas and the amount they wish to buy, at a minimum of 9 gallons and maximum of 50 gallons per month.

If Priceline can get that price from any of the preapproved stations, it charges the entire amount at that price to the consumer's credit or debit card.

The consumer then takes his Priceline card to that station and pumps gas throughout the month regardless of the posted price since it has been prepaid.

The price of any prepaid gas that isn't pumped within 30 days is automatically refunded to the credit or debit card. If the pump price is ever lower than the prepaid price, the difference is credited.

The involvement of major oil companies such as Exxon Mobil Corp. will be gravy for a program that can fly without them, Padgett said. In any event, Wall Street is fairly certain top oil companies will participate. "I do believe (oil companies will get on board) and that several have already, even though details haven't been released," said Sara Farley, an analyst at PaineWebber Inc. in New York.

Farley said many retail stations are owned by the large oil companies, adding that "a lot (of oil companies) would be more than happy to cut a couple cents a gallon to get people into their gas station to buy lotto tickets and snacks."

The announcement of the program last week coincided with the highest gasoline prices in 10 years, and priceline.com and Priceline WebHouse Club founder Jay S. Walker jumped all over the coincidence. "This is the perfect time for consumers to do something about the high cost of gas," he said. "It's the battle of the titans. OPEC was a force to increase the cost of gas. Now the Internet is the new counterforce to lower it."

Priceline's stock surged in trading this week, and Farley said the company's increasing focus on discounting everyday purchases like groceries and gas is a winner. "They're playing on (consumers') high sensitivity to what they pay for gasoline," she said. "I think it's going to be a very significant area for Priceline and the WebHouse Club."

A recent survey by Opinion Research Corporation International in Princeton, N.J., indicated that consumers are very aware of rising prices. Ninety percent of drivers who buy gas for their vehicles say they know the per-gallon price they paid for their last fill-up. Meanwhile, more than half of those people said that price always or frequently dictates their selection of gas stations.

This type of behavior is key to Priceline's success, as the program will drive consumers to gas stations that are willing to deal with Priceline.

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