Startup builds small-biz buying clout

The Internet is increasingly being used as a creative venue for companies to combine their buying power to strike better deals with suppliers

Continuing that trend, consulting giant Electronic Data Systems has teamed with Ariba to form what it calls leveraged buying networks, in which a group of blue chip companies combine their massive purchasing dollars to wring better deals from suppliers on everything from office products to chemicals to airline tickets.

Now a San Mateo, California-based start-up is set to take the same Costco-like bulk-buying strategy and apply it to the small-business sector.

Demandline.com, which will launch its service January 25, lets small businesses name the price they would be willing to pay for products or services. It then takes similar requests -- such as national long-distance service at 8 cents per minute -- and combines them into a buying pool.

The buying pool is put up for auction, and Demandline.com tries to get providers to meet or beat the price.

"We're making it possible for small-business owners to strike the same kinds of deals that much larger businesses can negotiate," said Pat Burns, the company's president and chief executive. "We're also providing a new channel for national service providers to access those hard-to-reach small-business owners."

Demandline.com is targeting small businesses with one to 100 employees. Initially, the company will auction such services as long-distance, Internet access and Web hosting, but it plans to quickly expand into other areas as it builds up its customer base.

Demandline.com's name-your-price strategy sounds a lot like Priceline.com's patented reserve auction business method. Even the company's name lends itself to direct comparison.

But Burns said the companies have different business models. Priceline.com operates on a one-to-one name-your-price strategy, while Demandline.com aggregates buyers. Also, Priceline.com requires buyers to submit a credit-card number to guarantee payment, while Demandline.com lets its clients say whether they will accept an offered service.

Brian Ek, a Priceline.com spokes-man, said the company was not yet aware of Demandline.com's service. However, he noted that the companies appear to differ in the way they bring buyers and sellers together. "We're definitely not an aggregator; we're a one-to-one model," he said.

While Demandline.com's service uses the Internet in a new way to group businesses into buying pools, it has a lot in common with other small-business-oriented portals. Companies such as Bigstep.com and eCongo.com have launched free Web hosting services for small businesses, in exchange for special rates on products and services.

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