SINGAPORE--US-based reverse auction site Priceline.com is planning to roll out its services in Asia by year end through its Hong Kong-based joint venture.
Hutchison-Priceline is a six-month-old partnership between the Nasdaq-listed company and Hong Kong-based Hutchison Whampoa Ltd and Cheung Kong (Holdings) Ltd. Hutchison and Cheung Kong together own approximately 30 percent of Priceline.com.
According to a Hutchison-Pricline spokesperson, its business in Asia will offer similar reverse auction services to customers through a "demand collection" pricing system, where consumers "name the price" they are willing to pay for a product or service offered online; if an agreeable merchant can be found, Priceline will purchase the product and charge it to the customer’s credit card.
"We will adopt the 'Name Your Own Price' business model that was successfully introduced by Priceline in the US and we will adapt it to the local strategy and customer needs, with localized Web sites," the spokesperson said in an email interview.
He declined to reveal which countries will see the rollout but noted that they would be countries with high Internet penetration. Sources said, however, that initial targets would include Hong Kong, Singapore and Taiwan.
On what products or services would be offered to customers in Asia, he said: "In the US, consumers can name the price they are willing to pay for several products, including travel products such as airline tickets, hotel rooms and rental cars. E-travel is the largest and the fastest growing business-to consumer segment in US."
Citing the Boston Consulting Group, he added: "Online travel is the third-largest market in online spending, gaining US$980 million in 2000, a rise of 188 percent over 1999. In the US, online travel has been the most successful sector in the business-to-consumer market.
"Based on various studies, it is believed that a similar trend will follow in Asia, (which is why) we are planning to enter first in this promising market. Our extensive research in Asia has shown that consumers have found the 'Name Your Own Price' model highly appealing."
When asked why the company was planning its Asian launch amidst trying times, he explained that "the fittest Internet company today has survived, and we have seen how Priceline.com has most recently recorded a profitable quarter. The timing is right for (the) online travel business".
Earlier this month, Priceline reported a second-quarter pro forma profit of US$11.7 million, or US$0.05 a share, far greater than First Call's earnings prediction of a penny per share. And, for the first time ever, Priceline reported a profit of a penny a share including charges. Sales of US$364.8 million topped the consensus forecast by 21 percent.
On headcount, the company spokesperson would only say that Hutchison-Priceline has people in "all the critical positions necessary to launch the services in Asia". In the US, Priceline.com has less than 400 employees.
He declined to reveal Hutchison-Priceline revenue projections for the region.
Overnight, Priceline fell US$0.369 to US$8.10 on the Nasdaq.