CD is on the cutting edge of running an efficient, modern business. They shy away from owning assets. They are franchising and selling membership services on the internet instead of actually selling internet products. For instance, they now are selling billions of dollars in cars, books, Compact Discs, appliances, etc., on the internet.
I suggest you read the following pieces which I've put together to help others better understand the internet portion of what CD is doing:
About One-click shopping the Cendant (CD) way:
<<. . . "Five guys selling TVs [on the internet] post their prices, then one guy goes down in price, then the other goes down, then they all pull out because no one can make any money," Forbes says. "The last thing retailers want is perfect information. Retail transactions can work for physical stores in a town. Even if I know that there may be a lower price 10 miles away, I may not drive there." But when comparative price shopping involves just a
few clicks of the mouse, the consumer will almost always find the best deal.
Most entrepreneurs now on the Web still seem to believe that prices for goods sold online should be about the same as they are elsewhere. Forbes, meanwhile, is working under an entirely different assumption. "It's! Not! Retail!" he declares. "Not as long as we're there. It's wholesale and under."
. . . when it comes to the more well-known, commodity purchases that make up most of the current retail economy, competition in electronic commerce will be brutal. "The Internet will not be an entrepreneurs' haven," he asserts. "There may not be any barriers to entry on the Web, but there are huge barriers to profits. It will make the restaurant business look stable by comparison." . . .
. . . CUC [part of Cendant] relaunched its Web site as netMarket, an aggregation of many previously separate sites and buyers clubs including the AutoVantage car shopping service and Travelers Advantage, its comprehensive virtual travel agency. Instead of just 250,000 items ranging from home appliances to computers to luggage to electronics to sporting goods to gifts to home improvement and gardening items, Forbes boosted the total number of products
to more than 1 million.
New under the netMarket umbrella is CUC's online bookstore, called Book Stacks, along with an expansive record store, Musicspot, and a live auction site. Access to everything is now available for a single $69 annual membership fee.
By fall 1999, Forbes says, netMarket expects to offer "95 percent of the products that a typical household would buy," up from about 20 percent now. "That means we have to get into the grocery, clothing, and drugstore business, too. A whole family should be able to go in there and be able to find most anything they'd like at the best price." . . .
. . ."The average Wal-Mart sells, what, 50,000 items?" he asks, with a hint of indignation in his voice. "We are over 1 million, growing to 2 or 3 million. Wal-Mart is a retailer. They sell. We don't sell. You pay us a membership fee, and we help you buy. We're on your side. They have inventory. We don't. . . .
. . . Forbes expects to have more than 1 million online members by the fall of 1998, up from 350,000 at the beginning of 1997. But the company hasn't been spending any money to recruit these interactive shopping club members. (Although it did promise $50 million in deferred commissions to America Online for exclusive placement as an anchor tenant in AOL's online shopping area.)
. . . Online shoppers, CUC has found, buy as much as three times more than traditional members. . . .
So far, netMarket has produced some startling results. Forrester Research had forecast that total online sales of goods and services to US consumers would amount to $1.1 billion in 1997. That prediction, it turns out, was woefully off base, as netMarket's sales alone will surpass the entire industry forecast. With monthly online volume now averaging $100 million, and with CUC expecting a strong Christmas season, netMarket should handle $1.5 billion
in transactions this year, according to Forbes, nearly triple its 1996 total. >>
Link to the full article:
wired.com
CD: $ 23.88b $ 24.00
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