The company's Mercata.com site rolled out a mere 10 weeks ago, intending to popularize cooperative buying online. Tom Van Horn, the company's president and CEO, calls it "we-commerce -- the greater the number of consumers who want to buy a product, the bigger the discount on the product."
The company is in the early stages of trying to build brand awareness, and planning a fall marketing campaign. It started with seven product categories, such as sports, consumer electronics, tools and watches, and this is the first new one.
Demand drives stock
Mercata staffers joke that Van Horn and the head of its PowerBuy program made the channel a priority because both their wives are expecting. But he swears it isn't true.
"We weren't going to do one at all, but we had so much demand, thousands of e-mails, that we did it first," Van Horn said.
Whatever the reason, Mercata needed only four weeks to put together what it calls a preview site, which will go live either late Sunday or early Monday. The company will then expand the number and type of goods that will appear on it. But Van Horn said baby furniture, strollers, car seats and other such items will be in the store.
"We should see some massive price erosion in this market," he said.
VanHorn says Mercata has other categories in the works, which he won't disclose. He says by year end the fledgling retailer will have 10 to 12 total categories.
"(Stores) are being driven by consumer demand and feasibility," Van Horn said in an interview.
Computers vs. cars
For instance, computers and software might seem a likely choice, but Van Horn says margins are so low and online competition so fierce that it makes little sense for Mercata to enter this market. He said that car sales, one of the top requests it gets from customers, are very attractive, but that tax and title issues and shipping present challenges.
"We've had car manufacturers call us to see where we might be able to work together," Van Horn said.
The company is also rolling out its first national advertising. Mercata this week began running ads on ZDTV, which is owned by ZDNN publisher Ziff-Davis Inc. Vulcan Ventures holds stakes in both ZDTV and Mercata.
In the fall, Mercata intends to expand its branding push, using both targeted e-mails and other promotions as well as conventional advertising in large markets with high levels of PC users. It hopes to use this to jumpstart "word-of-mouth" talk of the company.
"The fundamental difference about our business model is that it depends on viral marketing," Van Horn said. "Our model feeds off word-of-mouth. You want a product and you tell 100 friends and see if they want to bid, too. The more bids, the lower the price."
