PFSweb, Inc.			PFSW			Q4 2008 Earnings Call			Apr. 2, 2009
Company 5			Ticker 5			Event Type 5			Date 5

Just a few key highlights I believe that are important indicators for eCOST as we look at the details of this business, first, adjusted gross margins increased 90 basis points from about 9% in Q4 of 2007 to about 9.9% in Q4 of 2008. This is a result of improvements in our product mix towards higher-margin products, improvements in our automated pricing logic, which has driven higher product margins, continuing optimization of our freight programs and strong growth in our Business to Consumer segment where the overall financial characteristics of the business transaction are better than that in our Business to Business segment.

Secondly, as we look at the eCOST business, unique visitor traffic, this is a statistic similar to shopper count in a traditional retail store, grew during the fourth quarter of 2008 about 45%. Getting more shoppers to our site is one critical factor to driving higher revenue volumes. The introduction of the new technological capabilities that allowed us to launch the new Outrageous Deal marketing program in December 2008, has met with huge acceptance. These deals have also driven huge new membership growth in our Platinum Club program where December 2008 memberships were up about 800% over the December 2007 quarter. This success has continued into 2009 as well as our Q1 2009 memberships are up about 650% versus the same quarter in 2008. What’s important is that our historical data shows us that club members buy three times more frequently than non-club members. And as such we’re excited about the customer-like value potential to this large group of new club members that we’ve added over the last few months.

So margins are up, visitor traffic’s up. Third, new customer activity is up as well. New customers showed strong growth in 2008 and particularly in the fourth quarter. We added about 48,000 new customers in the fourth quarter of 2008 compared to 32,000 new customers during the same period a year ago. And that’s an increase of about 50%. We believe the Outrageous Offer marketing program has also been critical to our success and new customer traffic. So margins are up, visitor traffic’s up, new customers are up.

And what’s probably most exciting financially is that even with these outstanding characteristics I’ve just covered, we spent less money to acquire a new customer in Q4 2008 than we did in Q4 2007. The estimated cost to acquire a new customer for the fourth quarter of 2008 was $4.74, excluding our catalog costs, compared to $5.33, also excluding catalog costs, for the fourth quarter of 2007. That’s $4.74 this year versus $5.33 a year ago.

We believe that we are perfecting a suite of viral marketing methods that bring customers to our site by word of mouth or personal recommendation. The buzz created by our outrageous offers we believe has certainly drawn new customers to our site. And it does so in a manner that’s very cost effective when compared to other marketing programs like affiliate advertising or shopping comparison engines or search engine marketing.

Our decision in late 2007 to focus our management and marketing efforts more on the Consumer segment versus the Business to Business segment is showing strong success as well, as supported by the data I’ve already discussed. Our Business to Consumer segment represented more than 70% of eCOST’s total revenue in the fourth quarter of 2008 and was up about 13% versus the same quarter in 2007. We’ve certainly not abandoned the B2B segment, but with our strong focus on continuing to improve the financial characteristics of the eCOST business, it behooves us to continue to focus most of our resources on the B2C segment given its substantially stronger financial characteristics. B2B revenue was down about $10 million in 2008 versus 2007 as we reduced focused sales resources, and adapted our margin objectives to help ensure that B2B order characteristics meet our overall financial objectives. During Q1 2009, we did experience some firming up of the B2B segment as revenues begun to stabilize at a higher gross margin point than we’ve experienced previously.

Over the past three years eCOST has gone through some tremendous transformation. We remain excited about its potential, and while the transformation path has been longer and more complex than I ever imagined, I remain confident of my target that this business segment will ultimately be a