was doing before. Its more expensive, and I dont have the viral impact thats 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 thats whats going to happen here, is weve been, weve reduced to
acquire the eCOST businesses, we bought the business in 2006 from probably the high 20s, $30.00 to
acquire a customer now but where we were running around five bucks youre 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 dont 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 thered
be like an e-mail marketing fee or something thats some kind of scheme theyd come up with regard
<A Mark Layton>: Well, I think right now theyll stand behind the thing that says well
this is junk mail and our people didnt want it because they werent 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 youre looking for since you have a
theres an impediment fear to kind of slow you of getting going there?
<A Mark Layton>: Right. And weve had to slow down inventory purchases. Theres no doubt
about that aspect. Weve 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. Were not acquiring or were 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
<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, thats 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 its been basically were using the eCOST business model
and the people that work within it, to do the eStore function thats there.
So, if we add $50 million hypothetically of 20 point business thats in there, that obviously
completely changes the whole eCOST dynamic and I think it moves it away from its core business, but
its still a profitable business operation for us from there. So, thats 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 its a trough in
terms of the financial results and Im back to that financial trend that Ive got to see improving
here or do we have to find a different way to continue to do what were doing on the services side
with this piece thats there and unravel the eCOST products out of the thing because the margin
characteristics dont work. So its kind of a its 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.