June 3, 2009, 12:00 AM

Systemax cites a tough market as it shuts down ProfitCenter Software

Systemax, which recently added CircuitCity.com to its stable of retail operations that include TigerDirect and CompUSA, is shutting down its unprofitable ProfitCenter Software business, an e-commerce technology provider with about 10 retailer clients.

Systemax Inc., which recently added CircuitCity.com to its stable of retail operations that include TigerDirect and CompUSA, is shutting down its unprofitable ProfitCenter Software business, an e-commerce technology provider with about 10 retailer clients.

ProfitCenter, which offers a hosted e-commerce platform, is working with its retailer clients to help them migrate to other e-commerce technology providers as Systemax seeks a buyer for ProfitCenter’s intellectual property, ProfitCenter CEO John Marrah says.

ProfitCenter recently updated its e-commerce platform to operate with more open-source technology including MySQL database technology and JBOSS application servers, Marrah says. The change supports the deployment of ProfitCenter’s platform in Internet-based cloud computing environments such as from Amazon.com Inc. and Google Inc., which can operate infrastructure more inexpensively than ProfitCenter could when hosting clients on its own infrastructure, Marrah says.

But before ProfitCenter was able to deploy its upgraded platform in the market, the economic downturn forced Systemax’ hand, he adds. ProfitCenter contributed less than 1%, or $500,000, of the $3 billion in total revenue posted by Systemax last year, Systemax says. The ProfitCenter Software platform ranges from the e-commerce storefront and order management system to back-end fulfillment, customer service center and enterprise resource planning software. It also includes store point-of-sale technology, Marrah says.

Bernardine Wu, CEO of FitForCommerce, a consulting firm that helps online retailers choose technology providers, says some e-commerce technology vendors are finding more success in focusing on a particular technology functionality or particular types of retailer. "The PCS shutdown is not really a surprise given the market conditions for many e-commerce platforms who have struggled over the past year,” she says.

Richard Leeds, chairman and CEO of Systemax, says after recent attempts to sharpen ProfitCenter’s focus to establish a sustainable business model, the company realized it would be better off focusing on its core direct marketing and retailing businesses. “We have been unable to profitably market, sell and implement the software on a hosted platform model,” Leeds says. “The current economic environment is very difficult to sell the product into, and we do not anticipate that changing in the near future.”

Systemax will continue to use the ProfitCenter Software technology in its own retail operations, Marrah says. In addition to TigerDirect, CompUSA and CircuitCity, Systemax also operates Global Equipment Co. and other Global sister companies selling industrial and computer products to business, government and education markets; and a string of Misco consumer electronics retail sites in Europe.

Systemax did not say how many ProfitCenter employees will lose their jobs, but Marrah notes that some will work at Global Equipment Co. to help operate its ProfitCenter technology.

Systemax can be expected to focus more on its opportunities in the retail market, experts say. “Systemax seems to have bigger fish to fry,” says Paula Rosenblum, managing director at research and advisory firm Retail Systems Research LLC. She adds that, with CompUSA and Circuit City as well as TigerDirect, it has an opportunity to fill a void in building new competition for consumer electronics retail powerhouse Best Buy Co. Inc.

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