Tom Taulli is the publisher of the Taulli Report, an online investment site.  You can reach him at tom@taulli.com

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Last week, I said that I would write a column on the company Wit Capital took public, Radcom. But when I visited the site, I found that the IPO had already been sold out and the prospectus was no longer available. I'll analyze Wit Capital's next offering.

This week I'll talk about a favorite subject of mine: online commerce. With the surge in Internet stocks during the summer - Yahoo!, Lycos, Amazon.com - private Internet companies are seeing huge opportunities in going public.

One such company is Shopping.com. As the name implies, this is a Web site where you shop (great domain name, huh?). You can buy a myriad of products in categories such as automotive, books, cigars, collectibles, computer hardware and software, consumer electronics, cutlery, fragrances, furniture, gifts, gourmet foods, health and beauty care, home improvements, marine supplies, music CDs, sporting goods and watches.

Shopping.com's electronic shelves are chock-full of more than 350,000 SKUs (Stock Keeping Units). By October 31, the company expects to have more than 2 million.

Shopping.com calls itself a "wholetailer." That is, visitors can purchase products from the site at wholesale prices.

To this end, Shopping.com has built an impressive systems architecture - which, to use a common buzzword, is "scaleable" (it can handle surges in transactions). The Shopping.com technology integrates order placement, secure payment, inventory monitoring, order fulfillment and vendor invoicing -- all operating on a 24-hour basis.

How does Shopping.com give the average consumer wholesale pricing? The company's systems architecture provides a direct conduit to the manufacturers of the products. In other words, Shoppping.com has zero inventory. Thus, there are no costs of leasing warehouse space. No concerns about inventory obsolescence. No need for inventory tracking systems.

This is a beautiful concept. And this is what Wall Street likes. Look at Onsale.com. The company pioneered a new way of retailing by selling discontinued and clearance products by allowing Web visitors to place bids on products. This year, the stock has ranged from $4 5/8s to $31 1/2. The stock is currently at $29.

What's even more amazing is that Onsale has been making profits - something which has eluded most Internet companies.

Does Shopping.com have profits? Not yet. Then again, this is a very young company. The company was founded in November 1996 and the site didn't go live until July of this year.

There really hasn't been time to make money.

Just out of curiosity, let's take a look at its income statement.

Shopping.com Financial Profile

Net sales: So far, sales have totaled a negligible $55,541. Cost of sales: This includes the actual cost of paying vendors for the products, plus shipping and handling charges. These amounted to $50,509 - creating a minimal 9.1 percent profit margin. Then again, since the company has just started, the cost of sales should diminish over time as economies of scale kick-in. Advertising and marketing: Perhaps the reason most people have not heard of Shopping.com is that the company has spent a mere $11,603 on advertising and marketing. To start selling a significant volume of products, this expense item will need to increase substantially (in comparison, Onsale spent $948,000 on advertising and marketing last quarter). Product development: These include the expenses to create the Shopping.com Web site. These costs were $348,050. General and administrative: These are the expenses a company must pay regardless if it sells any products. These amounted to $906,852.

Because Shopping.com is a low-margin business, the key to its success will be to generate huge sales volume by doing a multimillion-dollar, marketing and advertising blitzkrieg. This has been the case with all the successful online stores, including Onsale.com and Amazon.com.

And this is a main reason Shopping.com is going public. By raising $10 million, the company will have sufficient funds to drive traffic and transactions.

The company has been growing at a blistering rate. This year, the number of employees soared from 4 to 44.

This requires high-bandwidth management. And Shopping.com has this in spades.

Bill Gross (chairman of the board):

He is the founder of idealab.com, a high-tech incubator (which helped launch CitySearch.com, a successful local Web service). Gross founded Knowledge Adventure, an educational software company, which he sold to CUC International earlier this year.

Robert McNulty (president and CEO):

He is the founder of Shopping.com. In 1983, he founded and served as CEO of the HomeClub (which has been renamed Home Base), until it was merged with Zayer in 1986.

Kristine Webster (chief financial officer):

She was the controller of Xpress Logistics, a transportation logistics brokerage company. She also worked at Ernst & Young LLP.

Mark Winkler (chief information and technology officer):

He founded and served as CEO of Winkler & Associates, a software consulting firm for such heavies as Warner Brothers, IBM, Pacificare HMO, American Express, The Los Angeles Times, Bank of America and TRW.

Douglas Hay (executive vice president):

He was the general manager of Et Al Inc., a marketing and merchandising consulting firm.

Of course, there are no guarantees. This company is very young. There are many competitors. There are tremendous complexities involved in selling more than 2 million products.

But this company has a good idea, and consumers always like to buy products at a discount.

Don't put your life's savings into this stock, but it's worth some speculation.