PeoplePC Broadens Membership Pitch

Tom Spring, PCWorld.com

PeoplePC moves beyond low-cost computers and Internet access this week, opening its own PeopleShop online store to sell computer-related merchandise directly to PeoplePC members

PeopleShop will target users among the company's 400,000 members who want to expand the use of their PeoplePC computers to include digital photography, music, and gaming, says David Waxman, PeoplePC cofounder and vice president of brand marketing and strategy.

PeopleShop launches with about 50 computer accessories, including everything from MP3 players to scanners, and digital cameras to software, he says.

The company will select and test the products for compatibility with PeoplePC machines and make recommendations, Waxman says.

And it's a members-only thing; non-PeoplePC members cannot access the online store, he says.

Company Seeks Additional Income

Offering PC peripherals is a change for PeoplePC, which makes money by referring its members to hundreds of merchants that offer discounts to PeoplePC members.

PeoplePC will continue to work with merchant partners such as Amazon.com, E-Trade, and Budget Rent a Car, Waxman says.

However, with PeopleShop the company hopes to improve profits by stocking brand-name peripherals, selling directly to its customers, and keeping a larger cut of the sale price.

"If we did a good job getting you a PC and online, and we picked up the phone when you had a question, then we hope to be a trusted source when you want to buy a digital camera," Waxman says.

PeopleShop emphasizes bundled products and services, not à la carte merchandise, he says. For example, if you're interested in digital photography, PeoplePC will recommend different bundles with digital cameras, photo-editing software, and carrying case--all of which it has tested.

"We don't want to be an online super-store," Waxman says. "There are already enough of those." He likens PeopleShop to a trusted specialty boutique with fair prices.

In time PeoplePC will offer peripherals using the same membership approach it uses with PCs, Waxman says. That is, today you buy the printer outright, but in the future PeoplePC will offer items such as personal digital assistants and printers as part of an expanded PeoplePC membership and fee.

Free PC Model Grows Up

PeoplePC is one of the few remaining start-ups that offers free personal computers to customers willing to pay for several years of Internet service. (For example, a 3-year membership at $25 a month gets you an IBM PC, Internet access, and buyer's club privileges.)

Waxman bristles at comparisons of PeoplePC to early flops during the free-PC craze. That's because PeoplePC doesn't force members to view advertisements, and it sticks with brand-name PCs like Hewlett-Packard, Compaq, and IBM.

PeoplePC works the same way buyer's clubs do, he says. It fosters a community of buyers, then markets products and services to them at reduced rates. It makes money from customer referrals and earns a percentage of sales revenue from participating merchants.

In recent months PeoplePC has expanded its membership base through affiliate buying programs with companies such as Ford Motor Company and Delta Air Lines, Waxman says. These companies offer PeoplePC computers and services at reduced rates to their employees as perks.

In attempts to further boost community among members, last week PeoplePC launched a new PeoplePages Web-based tool that lets members easily build home pages, he says.

This week the company also launched PeoplePal, a Microrosoft Internet Explorer add-on that alerts you when you visit an e-commerce site that offers PeoplePC members special deals, he says. PeoplePal alerts also pop up when you visit one of its merchant member's competitors.