Priceline: Only Halfway to Heaven

The good news for Priceline (Nasdaq: PCLN) is that it found the Holy Grail of dot-coms in the most recent quarter. It posted an operating profit. But Priceline hasn’t reached e-commerce Nirvana just yet.

I don’t mean to be a wet blanket. The Priceline story is impressive indeed, the stuff of Hollywood films. Few people thought the company could ever turn it around, never mind do it in the stretch of a few quarterly earnings reports.

But Priceline only got where it is by reducing its wind resistance, by trimming its sails. By downsizing to a shell of its former self.

Now it’s time for Priceline to start thinking big again. Not all at once, but clearly sooner rather than later.

Last Chance for First Mover

This is not to suggest that Priceline try to re-do what got undone along the way, like the grocery and gasoline experiments that failed miserably. But Priceline has to make itself a solid presence because its first-mover status in the online travel world is in serious jeopardy.

How to go about the task of solidifying? It won’t be easy. Priceline isn’t exactly swimming in cash, so an acquisition or two aimed at buying up market share in one fell swoop isn’t likely.

And its main competitors, including Orbitz and the now-even-more formidable Expedia (Nasdaq: EXPE) probably think they can crush Priceline without buying it up in turn.

Then there’s the potential that the economic slow times have driven customers to Priceline, customers who may not hang around and jump through the necessary hoops when times get good again.

Name Your Strategy

But all of the competitors know that Priceline has something they don’t: the name-your-price model.

Unfortunately, Priceline’s earlier attempts to expose millions of Internet users to this unique way of buying things flopped, as anyone who bothered to sign up for the now-defunct services knows.

But that doesn’t mean it’s not a good model. It means, frankly, that Priceline did a lousy job of rolling its services out, supporting them and controlling them. The partnerships that backed them were flimsy and hastily drawn up, just the kind of thing that went on when growth was the only thing that mattered.

Now it’s time for Priceline to think about its future again. It can probably make a nice little stand for itself in the travel world. Or it can take a look around and realize just how much value it’s sitting on.

Staying Alive

If Priceline is to regain the same e-commerce status as eBay and Amazon, it will need to act more like the other two.

eBay has invited every corporation over to use its two sales models: auction and fixed price. And Amazon has cozied up to brick-and-mortar retailers and online giants like AOL Time Warner, offering them the e-tailer’s expertise in fulfilling orders in exchange for exposure, capital and a lot of long-term job security.

Now it’s Priceline’s turn to boldly go where the others have before it. It’s time to turn the name-your-price model loose on the e-commerce world. Maybe it only has limited application, but even a limited slice of the whole pie is much more than Priceline itself can deliver.

End of Solo Flight

Even with profits coming in, Priceline’s capital resources are relatively pinched. It needs help. Fortunately for Priceline, so do so many of its fellow Internet retailers. So when the e-tailer steps out to explore new galaxies, it should not go at it alone.

There’s nothing wrong with admitting the Web is too big a mountain to scale solo. A few carefully chosen partners can help make the climb a lot easier.

Priceline has the upper hand now again. Of that there’s no doubt. Let’s hope they use it wisely this time around.

What do you think? Let’s talk about it.


Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.


1 Comment

  • Priceline.com will always be the target of a few juicy journalistic stories regarding customer service. It comes with the territory. Despite the numerous warnings when you place a BID for a flight, hotel, or rental car that it’s NON-REFUNDABLE, NON-CHANGEABLE, NON-TRANFERABLE, there are always a few who try to whine and have the policies changed for them. When they don’t get their way, they complain even louder to those who will listen (journalists).

    Anyone who has used Priceline.com, and actually read what you are agreeing to when placing a bid, will not be surprised to know there are no refunds, period. That’s the trade-off.

    Priceline.com will continue to grow in their strong areas (airline tickets and hotel rooms), especially during a time when people are looking for ways to make their dollar go further.

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