What’s puzzling to Van Horn, then, is why auction Web sites, like eBay, are so popular. When you think about it, auction sites don’t guarantee that you’ll pay the lowest price for a given item, but rather the highest. And yet we’re hooked. Van Horn thinks he’s hit on a better way to get lower prices on the stuff you want. It’s his new shopping Web site called Mercata (www.mercata.com), backed by Paul Allen’s venture-capital fund.
The premise is ingeniously simple: if you could gather together a large-enough group of people, you could probably bargain for a better price for that blender, set of golf clubs, cordless drill, stereo component or electric toothbrush. This is what’s commonly referred to as a “volume discount.” In real life, though, there’s no way you’d have the time to rustle up 100 of your best friends to go shopping for kitchen appliances. That’s where Mercata comes in.
The site, according to Van Horn, prenegotiates volume discounts with the 150 manufacturers currently participating; some of the name brands you’ll find include Cuisinart, Top-Flite, Braun, Toshiba, Olympus, RCA and Kodak. Mercata then calculates a downward-sloping price curve showing how, with each additional person who buys a selected item, the price drops incrementally–it could be a few cents, it could be dollars. This gradual markdown process continues until the sale, what Mercata calls a “PowerBuy,” runs through its allotted time. Van Horn doesn’t guarantee that the final price will be the lowest anywhere. But it will almost certainly end up lower than the price you agreed to pay, since it continues to drop as people queue up behind you.
Still, Mercata may have an enticing model. Just ask satisfied shopper Phyllis Petcher. She recently sent her two daughters to scour the stores in Portland, Ore., for the best price on an electric ice-cream maker. They came back with $59.95 for a nice Cuisinart model. Around the same time, Petcher discovered Mercata. There, by happy coincidence, she found the exact same model. Two days later, the ice-cream maker was hers for the low, low price of $49.72. “I don’t understand how it works and I really don’t care,” she says. Which goes to show, any way you deliver it, the lowest price is always the bottom line.
