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Sticking to the basics
RetailExchange employs a direct sales force of 25, who call on retail buyers, jobbers-who in the offline world serve as dealers to find and sell goods for retailers-as well as manufacturers and other resellers of goods. While employing a sales force is costly, the company believes it’s the right way to go. “We justify this by virtue of the fact that the whole concept of doing business on the Internet has not come as easily as people expected. We need to take a hands-on approach to really explain the benefits of our exchange so users can see how it enhances the way they do business,” says Kissell.
While RetailExchange.com’s strategy is to provide a service to buy and sell only off-price consumer retail products, Pam Stubing, a retail analyst at New York-based Ernst & Young, thinks it could become victim to consolidation in the exchange arena. “Exchanges need volume to survive,” she says, noting that the company may have an opportunity to become part of a larger exchange in the future.
Although some may see vertical exchanges as becoming obsolete, Frieze says RetailExchange.com’s business model and vision have been validated by its six investors. The company believes it has been successful in securing funding because it is doing only one thing-providing a place online to buy and sell excess consumer goods.
A vertical focus
While continuing to focus on its niche market, the company plans to develop more technical partnerships with Gordon Brothers, Essentus, Retek and i2.com, all b2b and retail software solutions firms; Notara.com, which provides web-based collaborative solutions for consumer brand companies; and CIT, a leading accounts receivable management firm. Plans include working with Essentus to combine Retail-Exchange.com with Essentus-built collaborative and supply-chain management applications, working with CIT to give sellers on the exchange financial support such as credit protection and financing for invoice payments, and a deal with Retek’s retail.com retail industry information and solutions site that will allow its users to access the RetailExchange.com services.
“Back when b2b was all the craze, we were already in it with a plan that was based on business fundamentals,” says Frieze, who notes that the competition among exchanges is now more consolidated. But the company is undeterred by larger exchanges that offer more goods and services. “You need a vertical focus to succeed in this market,” he says. “Focusing on just one industry-excess retail consumer goods-with all our tools and capabilities designed specifically for retail is what’s going to matter.”