Be Your Own Barcode

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Priceline must now make its reverse-auction process work with items like gasoline, packaged groceries and credit cards. Such products are worth just as much tomorrow as they are today, giving suppliers little incentive to dump inventory by partnering with Priceline. "The Priceline dilemma, if they can't secure partnerships, becomes one of increasing costs to them and decreasing benefits to their consumer," says Sam Peltzman of the Graduate School of Business at the University of Chicago.

In the case of groceries, Priceline's inability to make deals with such major manufacturers as Procter & Gamble and Kraft has meant that customers lured by the 90-day free-trial period have found prices rising after they signed on. "I think what they do is sucker you in with a really low price," says Amy Anuszewski, a software engineer in Reading, Pa. "Once you're hooked, they start charging a monthly fee and higher prices."

Overall, Priceline savings present a crazy-quilt pattern. The company has succeeded in lining up partnerships with second-tier telephone companies eager to unload excess long-distance capacity, such as Net2Phone and https://ZeroPlus.com , so consumers shopping for long distance via Priceline can get good deals. But with major oil and gas companies such as Exxon-Mobil and Texaco, Priceline has struck out. Oil companies that spend millions building brands are loath to sell gasoline via a site that puts price before brand.

Priceline claims that 35% of its customers this year are returning for more business, and it has steadily cut its losses from 12[cents] a share a year ago to 4[cents] today. But reaching CEO Schulman's goal of turning the corner into profitability by 2001 will require Priceline to partner with suppliers in markets where its model has not yet proved to have an advantage.

And then there is Hotwire, and other competitors are sure to follow. Ironically, the very spread of this sort of business model could create Priceline's biggest challenge. With ever faster, always-on gizmos connected to the Web, we will all have access to ever more information. And if we all know the lowest accepted bid for a certain flight or box of cereal, then won't that bid become the de facto price? Priceline's revolution would then have led us right back to where it began: the world of fixed prices.