Alphabuyer offers 'group buying' for electric bills

Alphabuyer Inc., a year-old Paoli e-commerce company that enlists customers for "group buying for your bills," probably could have picked something a little sexier to start with than the humble electric bill.

But since launching last year with discount offers for Peco Energy Co. electricity customers, the group-buying service has expanded into three other states, including New Jersey, and other commodities, such as natural gas.

Cofounder Kevin Johnson imagines that eventually every savvy, penny-pinching customer will go through Alphabuyer to join groups to buy products and services ranging from discounted Internet and cellphone service to gasoline, heating oil, or antivirus-software subscriptions.

"The sky's the limit of categories," said Johnson, Alphabuyer's chief executive. "We just picked the most unglamorous one to start on."

Alphabuyer is fashioned on a model made successful by Groupon, the online group-buying marketer. It uses social media and viral marketing to develop networks and spread the word about current offers.

But Johnson and cofounder John Raisch bridle at comparisons to Groupon, which they say induces customers to buy things they don't necessarily need. Alphabuyer is all about squeezing discounts on bills customers already are paying.

"We don't really like to be compared to Groupon," Raisch said. "We're not really like them at all."

Rather than simply matching new customers to energy suppliers, Alphabuyer is designed to build relationships with customers, alerting them when better deals might be available in the future. "We've got your back," the company's promotions proclaim.

Alphabuyer melds the experiences of its 39-year-old cofounders - Raisch's background in online retail and Johnson's experience as a procurement specialist, fixated on "spend analytics," the art of identifying costs and negotiating with suppliers to get the best deal.

Johnson, who put up $800,000 of the $1.7 million invested in Alphabuyer so far, also owns Dryden Procurement Technologies L.L.C., which helps big companies buy more effectively. Raisch has extensive e-commerce experience with CDNow and GSI Commerce Inc., the King of Prussia company acquired by eBay Inc. this year.

In 2010 the two saw an emerging opportunity in Pennsylvania's newly deregulated utility markets, where energy companies were aggressively pursuing retail customers free to choose alternative suppliers, often at a discount to incumbent utilities.

Alphabuyer pitches its service to suppliers eager to reach an online audience through a new marketing channel.

"Alphabuyer allows us to reach a whole different type of customer accustomed to buying online," said Lisa Dornan, a spokeswoman for Spark Energy L.P., a Texas marketer that entered the Pennsylvania market this year.

"They help us to educate the customer as we go forward," said Jon Loercher, a vice president of Amerigreen Energy Inc., a Lancaster supplier whose fixed-rate offer to Peco customers - 20 percent off current prices - is currently featured by Alphabuyer.

In exchange for paying the costs for acquiring the new customers, Alphabuyer demands a discounted price. Each month it posts a new offer, available for a limited number of customers, for a limited time. The more customers who sign up, the lower the price.

"It's a great idea, from some really entrepreneurial guys," said Matthew Sommer, a vice president of Shipley Energy Co. in York, which has employed Alphabuyer to extend offers to Peco and UGI gas customers.

Johnson said Alphabuyer vets the suppliers. "We only put a deal up with a supplier we'd sign up with ourselves," he said.

Alphabuyer either receives an up-front fee from the supplier for signing up a customer or a commission based on the amount of electricity consumed. Johnson said Alphabuyer had even forgone payment on some deals to keep the price low and establish its brand name.

Still, Alphabuyer has met resistance penetrating the utility market - it has signed up fewer than 10,000 customers since starting last year.

As other suppliers know well, utility customers are reluctant to switch, even when offered discounts that may save them 10 percent or more on a big monthly bill.

"We expected more to switch because the savings are out there," Johnson said.

In addition to Peco customers, Alphabuyer is currently pitching customers of New Jersey's Public Service Electric & Gas Co., Jersey Central Power & Light, and Atlantic City Electric. It also has offers for Duquesne Light and UGI Gas and it has extended offers for utilities in New York and Illinois.

More on Alphabuyer: www.alphabuyer.com or 1-855-435-8075.

Peco Energy Co. responds to customer questions at www.pecoanswers.com.

Pennsylvania's Public Utility Commission explains electrical choice and lists alternative suppliers at www.papowerswitch.com.EndText