BtoB

Dreaming of a b-to-b Christmas

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While consumers swarm the Web for hot holiday deals and eBay auctions PlayStation 2s, retailers are also heading online, tapping b-to-b marketplaces for help in procuring hot products and liquidating losers.

Because this is the first Christmas for most retail e-marketplaces-the mammoth WorldWide Retail Exchange, for instance, opened for business only a few months ago-few retailers, either online or brick-and-mortar, are using b-to-b exchanges this way today.

Looking into the future, however, it's clear retailers will be able to use the Internet to better forecast and execute their holiday plans, which for many can represent 60% to 70% of their annual sales.

"I don't think e-marketplaces are going to impact this holiday season. This season, especially for e-tailers, is mainly about avoiding the disasters of last year," said William Brandel, an analyst with Aberdeen Group Inc.

Indeed, retailers found selling to consumers via the Web to be difficult and expensive. Besides, online revenues are a drop in the bucket compared with brick-and-mortar store sales.

That's why the appeal of b-to-b is so strong. Improvements in areas such as inventory and supply chain management go right to a retailer's bottom line, analysts point out.

"In the future, better inventory management and sourcing will be used by retailers to gain competitive advantage," Brandel said. "They're talking about it, but it's not happening yet."

In fact, some forward-thinking retailers and e-marketplaces are beginning to test these concepts today. Most of the early activity appears focused on one-time events, such as spot buys or liquidation sales.

"What we're starting to see is companies treat this issue proactively," said Dermott Ryan, vice president-marketing for TradeOut.com, an excess inventory and liquidation exchange. "If you wait and don't acknowledge inventory problems and try to hide it from your CFO, you can get totally underwater on this stuff. "

In addition to Web-based liquidations, TradeOut has created a consulting arm that helps large companies-including big-name manufacturers and retailers such as Sara Lee Corp., tool-maker Stanley and Ames Department Stores Inc.-get a better feel for why they are having inventory problems and how to get ahead of the game.

Inventory liquidation "is a huge and fragmented marketplace and suffers from a lack of information transparency. Nobody will tell you anything," Ryan said. "You talk to a guy and he'll tell you, 'That's some crappy stuff, maybe I'll give you 10 cents for it.' He knows what it's worth but he isn't going to tell you."

Traditional retailers aren't the only beneficiaries of Internet procurement. Beginning in late October, TradeOut had its first-ever holiday-focused bargain merchandise "blow-out" and targeted an unusual audience: eBay power sellers. As eBay grows, "these microbusinesses are growing into real businesses," Ryan said.

That may not seem like a traditional b-to-b play, but TradeOut tapped brand-name product manufacturers for the event and sold several million dollars worth of goods to the small e-tailers, who then sold these wares to eBay shoppers.

Hard-to-find products

Another b-to-b exchange, RetailExchange.com, helped a group of retailers in mid-November buy a large supply of scooters, one of this season's hottest toys. The purchase was made by Ro-Mart, a Massachusetts-based corporation that helps retailers source hard-to-find products.

The company, in business since 1990, is highly secretive to protect its members' trade secrets, but members include The Warehouse, described as New Zealand's Wal-Mart, and Olimpica, the largest grocery chain in Colombia. Since becoming a member of RetailExchange, Ro-Mart has sold over $1 million in products and made almost a half-million in purchases.

"During the holiday season, retailers are looking for any competitive advantage," said Roy Balfour, founder and president of Ro-Mart. "If one of our retailers is looking for a hot item and can't get it, we would normally look for it through our [brick-and-mortar] network. With RetailExchange we can look beyond that. These are rapid-fire decisions. Most decisions on inventory are done in a matter of days or even hours."

RetailExchange went live last February with some $60 million worth of merchandise. It has since grown to more than $300 million stretched over 16 product categories.

"Our model of opportunistic purchasing works well during the holiday season," said Jason Kissell, the company's director of marketing. "Retailers might sell out of items quickly, or might need at the end of the season to get rid of some product. Either way, we can help them out."

In addition to holiday deals with Ro-Mart, the exchange sold home products to off-price retailer Building 19 several weeks ago. The goods were likewise targeted to holiday shoppers. Separately, the exchange has also sold quantities of rugs and slippers to other retailers.

Spot buys and liquidations will never represent a large portion of retailer procurement efforts. But they can make a difference to the bottom line because they give retailers an entirely new way to buy and sell products, RetailExchange's Kissel said.

"Retailers know what they're going to do for the holiday season in July or August. They're locked and loaded," he said. "But if you sell out of a hot product in the beginning of December, you can potentially find the product on our site."

Targeting e-tailers

Another b-to-b retail exchange, USgift, launched a new marketing program to help e-tailers source gifts specifically for the holiday season. Among the retailers onboard with USgift are BlueLight.com L.L.C., ServiceMerchandise.com and OurHouse.com L.L.C.

USgift is working on the effort with Ingram Fulfillment Partners, a unit of distribution giant Ingram Micro. The twist is that the e-tailers never have to take possession of the products. Rather, USgift helps pick, pack and ship the orders directly from Ingram's warehouses.

"The e-tailers don't have to carry inventory, so there's little risk for them," said Stewart Hammond, USgift's director of marketing.

Despite the importance of the holiday season, not all b-to-b marketplaces are tuned to focusing on the season. Fashion e-marketplace 7thOnline.com L.L.C., for instance, aims to help vendors get their products in front of store buyers, a process that requires a long lead time. Contacted last week, a spokesperson said the company wasn't focused on this Christmas but on the fall 2001 fashion season.

And you thought the retail Christmas season started early.

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