In its second-largest acquisition, Amazon buys the company for $970 million.
It’s an idea ready-made for the Web: an Internet marketplace for manufacturers and retailers to trade excess inventory. Launched in February, RetailExchange.com, a spinoff of 75-year-old Gordon Brothers of New York, hosts more than $100 million in retail goods. Investors love the concept: The company recently drew $8 million in second-round financing.
“This has huge potential for the retail industry,” says Matt Sanders, associate analyst at Forrester Research. “There is such a fragmented supply chain that finding buyers and sellers for excess products can be difficult.”
Among the advantages of an e-marketplace: It overcomes high distribution costs for off-price items, moves high-volume, low-cost items easily, and connects distant supply chains. RetailExchange is free to buyers, while sellers pay $25 per listing, plus 5% of each sale. According to Forrester, sales of consumer goods via e-marketplaces will reach $29 billion by 2004. The challenge, Sanders says, is technological, with the retail industry lagging on electronic trade. “It has some catching up to do.”