Business-to-Consumer Commerce1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Cendant: An Unsung Web Giant StirsBy Connie GuglielmoIf any company is primed to bethe leading retailer on the World WideWeb over the next decade, it may justbe Cendant Corp.Name doesn’t riig a bell? Maybebecawit’sjusta month old,fomxd bythe merger of direct-sales powerhouseCUC International Inc. and HospitalityFranchiseSystems Inc.,a l%mchiserthatowns name-brand properties in&d-ing rental car agency Avis Rent A CarInc., hotel brands such as Days I”“,HowardJohnsonandRamadahm,andrealestatefinns such as Century21 RealEstate Corp., Coldwell Banker Corp.and ERA Franchise Systems Inc.Or, maybe it’s because CUCfounder, Chairman and Chief Execut-ive Officer Walter Forbes and HFSChairmanHenry Silvermanlikeitthatway. Both built their empires believingthat while most consumers rallyaround brand names, it’s immaterialwhether those brands are labeled asproperties of CUC or HFC. SaysForbes: “We’ve heretofore marketedunder other people’s brand names, andthat has meant we don’t have to spendanymoneyo” advertisingorpublicity:’It’s a strategy that’s paid off. WhileCUC and HFS might not have namerecognition among consumers, theirlowpro6le approach has brought themconmmer dollars and made them dar-lings ofWall Street. Each raked in morethan $2 billion in revenue in the pastyear and touted double-digit annualgrowth. And the combiied new cam-pany- Cendanr is a fabricated wordwith Latin origins that is meantto signify “to ascend’- is expected to ringup more than $5 Lid-lion in s&this year,accorto Hanbrecht & Quist LLBut the merger, Forbessays,was not about size-it was aboutextending both companies’ consumerreach. By having a host of complemen-‘ary services and products in a widearray of categories, Forbes says he can6naUy m!iw a dream he had as a sm.dent at the Harvard Business School ti1973: to create an interactive globalcompany without brick-and-mortarstorefronts that o&slow-pricedgoodand services directly to consumers whoshop electro”ia!ly. It’s t&en 25 yearsfor the technology to catch up with hisvision. And though Forbes admits theWeb does not yet have the critiwl massof customers necessary to sustain sucha global entity, he’s confident no othercompany in the world is in a betterposition to pull it off than Pendant(www.cendant.com).“While there are no barriers toentry to setting up a business on theWeb, there are hugebarriers to profit andto gaining mind share,”says the 54.year-oldForbes, speaking fromCUC-Cadant headquar-ters in Stamford, Con”.It takes, he says, a hugedatabase of customers, com-peIli”g products and value-added ser-vices, and a well-oiled sales andcmtomer service back end. “We’vespent the past 15 years building ourown operating system for handlinginteractive sales:’ says Forbes, whosefirst attempt to build an interadiveretailer, Camp-U-Card Inc., was a tlopback in 1973.“It’s taken that long for usto build a cutomer service admin.istration, establish relationships withmanufacturers and set up huge phonerooms-alotofphonerooms-When Empires Join ForcesiCendantIPropertiesnetMarket(www.netmarket.com). shop& AdvantageC Traveler’s Advantage. Auto Vantage I. @.mkSbckrC Music Spot. Good MoviesC Clcmifiedr Zoo0(ioint venture)Rent.net(www.rent.wt)ISoftwareDavidson BIAssociates Inc.siino On-tin0 Inc.BlizrlndEntertainmentKwwledee SoftwareKkketing DadsAmerica Online/CompuServe/Prodigy. shopper’s Advantaget Traveleh AdfankJget Auto Vantagec...-.Holdings -Franckirar fhvel)b Avisc cuy~l””t Ramadac Rem? Con&-miniurns hf.. Howard John-nt Super8t TrawlcdgeFranckires (Real Estate). Coldwell Bctnker. Century21Entertainment kooks(local discoundtobe able to handleastomacalls.You just can’t build this kind oforganization 0ver”ight:’How does Cendant stack up?Through the 20.plus member-ship-driven buying clubs and ser-vices it offers, CUC boasts 73million members, while HFScounts 100 million consumers asits customers. Both have well-established telemarketing systemsin place. And CUC’s membershipmodel - consumers pay annualfees that cost betwe” $49.95 and$69 for access to low-pricedgoods and services-assures it asteady Stream of revenue.“We think we’re the premierconsumer services company:’Forbes says. “We’re not a ‘on-glomerate. At the core, we’re nar-rawly focused. But it takes a lot ofpieces to be able to service the cu.-tamer from begi’nning to end Wewant to beNo. 1 or2 in evayma~ket we play in, and, in order to dothat, you have to own the market.And if you want to cross-sell toconsumers, it helps to have majorpositions in the physical world?It’s not hard to imagine, b__.-- ~-INTERBCTIVE WEEKV Forbes says, a c”st”mer booking aweeklongstayat”neofCendant’shot~properties and being told they an geta deal renting a car though Avis; orbuying a home through Century 21and being told about Cut’s Com-pleteHome Service program, whichoffers home improvement discountshopping programs.At the heart of Cendant’s Webstrategy is the netMarket site (www.netmarket.comj, launched last sum-mer to put CUc’s offerings, and SO””HFS’ brdnds, under one umbrella. For$69 per year, netMarket members getaccess to more than 250,000 brand-name products - everything frombooks, CDs and c”nsumer electronicsto travel packages and cars-at dis-counts of 10 percent to 50 percent offmanufacturers’ list prices.“Because WE make most of ourmoney on membership fees, we canprice aggressively In a lot of our mer-chandise categories, we don’t makeany money at all,” says Scot Melland,vice president of business developsmat for interactive services.Though CUC loses money onmemberships in marketing and over-head during the first year, subsequentrenewals are mostly profit - about$30 per member. The company pointsto its renewal rate “fabout 70 percentas a sign of its continued success, withForbes adding that the company signson 100,000 new phone-based mem-bers per month. About 7 million ofCUC’s 73 million members are basedoutside the U.S., and Forbes says thecompany is seeing 100 percent growthin overseas membership.NetMarket sales, as well as salesgenerated through CLJc’s presence on“nlinese~cessuchasAmericaOnlineInc., will represent only a small part ofCendant’s business this year. ButForbes is anxious t” c”nvert more ofCendant’s phone-based members tonetMarket wrs. He makes no secret ofthe