SEC Filings Section 16 Filings Only
 
PFSWEB INC filed this 8-K on 08/13/2010.
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was doing before. It’s more expensive, and I don’t have the viral impact that’s helping me acquire new customers that I have so my new customer number was down this quarter as well in that particular segment of our business. So if you take all of those things into factor and it drives a higher cost to acquire and that’s what’s going to happen here, is we’ve been, we’ve reduced to acquire the eCOST businesses, we bought the business in 2006 from probably the high 20’s, $30.00 to acquire a customer now but where we were running around five bucks you’re probably going to see that number move back up again as we look for other channels out there to be able to acquire clients. And it comes back to the pressure that it puts on the business in terms of the gross margin characteristics, that this has added. We just don’t have a lot of margin for error. If you have a 40 point gross margin, it makes different financial characteristics in terms of what you can afford to pay to acquire a customer.
<Q — George Walsh>: Well, do you think they could come up — is there a possibility there’d be like an e-mail marketing fee or something that’s some kind of scheme they’d come up with regard to that?
<A — Mark Layton>: Well, I think right now they’ll stand behind the thing that says well this is junk mail and our people didn’t want it because they weren’t reading it.
<Q — George Walsh>: Right, okay. And just on the other side with the impact of that. How is this affecting your acquisition of inventory or things that you’re looking for since you have a — there’s an impediment fear to kind of slow you of getting going there?
<A — Mark Layton>: Right. And we’ve had to slow down inventory purchases. There’s no doubt about that aspect. We’ve had to be more selective on the deals that we buy and some of those that may have been second-tier hot, if you will, deals. We’re not acquiring or we’re not buying there as many units in deal that we would have before.
<Q — George Walsh>: Okay. And you obviously I guess try to also look for some higher-margin type things?
<A — Mark Layton>: Yeah. And again, this is where the eStore segment comes into play in here, because as we look at Services clients that want to utilize this model, as I was talking earlier, the gross margin range would typically are targeting and that are in the 15 to 25% range. So, if we can add $50 million worth of 20 point business to the eCOST area, that’s over there what allow us to create economies of scale and gross profit dollars that uses the overhead of the eCOST business model that we have. Because it’s been — basically we’re using the eCOST business model and the people that work within it, to do the eStore function that’s there.
So, if we add $50 million hypothetically of 20 point business that’s in there, that obviously completely changes the whole eCOST dynamic and I think it moves it away from its core business, but it’s still a profitable business operation for us from there. So, that’s part of the complication in terms of evaluating where we go with the business with this thing, this is it, we kind of ingrained it into our service offering from here, so the question becomes whether it’s a trough in terms of the financial results and I’m back to that financial trend that I’ve got to see improving here or do we have to find a different way to continue to do what we’re doing on the services side with this piece that’s there and unravel the eCOST products out of the thing because the margin characteristics don’t work. So it’s kind of a — it’s a complicated analysis and something that we just have to continue to look at.
<Q — George Walsh>: Okay. All right. Thanks a lot.
<A — Mark Layton>: Sure, George.
Operator: And at this time, I am showing no further questions.

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