Priceline is licensing its "name your price" business model to a privately-held firm that will let US consumers bargain for groceries.
WebHouse Club will begin trials in New York, New Jersey and Connecticut in November. The program allows shoppers to pre-negotiate prices, which are then honoured at any of the 600 participating stores.
Priceline will get royalties from WebHouse Club and warrants to acquire a majority interest in the firm. WebHouse said Tuesday that it expects to get $65m (£40) in a first round of financing from investors, including Microsoft co-founder Paul Allen's Vulcan Ventures, Wit Capital, Goldman Sachs and Walker Digital (Priceline's parent company). "I think this covers everything. If we can allow consumers to name their own price for pet food and diapers we can have them name their own price for almost anything," Priceline founder Jay Walker said. "All along we've been saying it's a broadly horizontal model because it's a pricing system."
Walker said the new company hopes to sign up 100,000 customers in 90 days in the New York metro area, and plans to expand the service to 25,000 stores nationwide by the end of the year. Eventually, the service will include chemists and discounts stores, as well as grocery stores, he said.
Priceline made a tremendous splash with its model, which lets consumers name the price they are willing to pay for things like airline tickets, cars and mortgages. The prices are sent out to service providers, who can choose to meet the offer. Priceline's shares took a tumble recently after Microsoft unveiled a similar service for hotel rooms.
Walker said that the WebHouse plan had been in the works for nine months. He said the company chose to set it up as an affiliate to gain "the focus and the energies of a startup". "When you have a public company growing very quickly it's hard to tap the energies of the startup," he said. "With an affiliate you have access to (an outside) capital pool but you still get warrants. If it's successful (Priceline can buy the company's stock)."
The new WebHouse Club will debut with a $25m marketing campaign that will feature William Shatner, who has appeared in ads for Priceline.