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Technology Stocks : OnSale Inc. -- Ignore unavailable to you. Want to Upgrade?

To: B. A. Marlow who wrote (3731)	2/22/1999 12:07:00 AM
From: Don Wellington Jr.	Read Replies (1) \| Respond to of 4903

Thanks, Great updates from the Motley's OnSale stuff. It helps me with my day to day business with OnSale, as well as my investment strategy thinking. 1) Price Waterhouse - When you go to the OnSale home page, you see a Price waterhouse Coopers logo and a Report link, when you click it you see a certification letter. BUT>>>>>>Now that I read it, you are probably absolutley correct in your supposition about soft money. The OnSale statement specifcally states "invoice cost" as the basis for atCost's guarantee of "cost" or "wholesale". What a "scam" or "brillant marketing ploy", depending how you view it. I recently put together a business plan, on a consulting basis, for a company, planning to manufacture and market a computer product to the retail channel. That plan, which was successful in creating investment funding, had 25% of Invoice Cost Dollars built-up just to cover "after invoice marketing costs". In general retailing, those costs include; annual volume rebates, co-op advertising, special market funds, etc. etc. In the case of Tech Data - OnSale - etc. those funds could be very significant. Tech Data's revenues have been falling, supposedly, I haven't actually checked. But, if so, they can eliminate a large sales and marketing overhead by working with atCost/OnSale. At least 10%. Tech Data also demands initial marketing funds upfront from the manufacturers, as well as ongoing inputs of capital. Co-Op is contracted at 3% or more from all manufacturers, and is not passed on as an invoice cost discount. OnSale could have a potential goldmine, however, I think they have calculated that into their 9-10% estimate of gross margin on sales of atCost-Tech Data supplied products.It must be, because at $10.00 plus transaction for a $2,000 computer, it doesn't add up to 10% margin. Finally, and more interesting, OnSale has had some severe problems operating two distribution centers, plus distributing small expensive items out of their Mt. View headquarters. If the "marriage" were to progress, I could see the next notification to direct selling vendors of OnSale atAuction, is a shipto address to the Tech Data distribution facility, and a closing and eliminating of the overhead of the current, OnSale distribution centers. This intial phase may be a test, to make sure Tech Data can handle the individual fulfillment and shipping, and to iron out the systems glitches between the two companies. Of course, the easiest way to consolidate, would be merger. They would spring ahead of any rival and still leave open a subsequent merger with a larger entity that could expand their presence and customer base(ATT, Time Warner, Yahoo, etc. Enough, I'll check back tomorrow.