Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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Other service offerings from Overstock could include procurement of corporate gifts and premiums, including desk calendars embossed with a retailer’s name for distribution to customers. “We have in mind a business portal for small retailers,” Byrne says.
EBay is also trying to attract more retailers as well as wholesalers through advertising campaigns and additional services. “Our challenge on eBay has always been to build up supply and demand at the same time,” Wiley says. EBay is rolling out this fall an advertising campaign targeting small retail chains as well as wholesalers to make them aware of the kind of business that can be conducted in eBay’s Wholesale Lots. “One of the reasons retailers don’t buy on eBay is because they don’t realize they can,” Wiley says.
Moreover, eBay is already offering discounted health care and dental insurance to eBay Power Sellers. It lets them purchase discounted health and dental plans for themselves and their employees, even if some of their employees work in physical retail stores. Wiley adds that eBay is considering whether it will extend these benefits to other retailers who only buy on eBay. “We’re always looking at ways to benefit small businesses,” he says.
Offering insurance plans through public exchanges can be difficult, however, because of differing state laws affecting how plans can be administered, and because of limitations on passing on volume discounts to non-employees of the sponsoring organization, Calvin says. Indeed, eBay has scaled back its original plan of offering comprehensive health care policies to a more limited menu of coverage. Nonetheless, some retailers say they’d be glad to consider buying such services through an online marketplace. “If the price was right, I’d always be willing to look at a health insurance plan from a reputable company,” Dismukes says.
But if Liquidation.com, Overstock and eBay are to grow their b2b business with small retailers, they’ll have to convince merchants like William Frodsham, a partner with Washington Dollar Stores, based in Ellensburg, Wash. Frodsham has purchased large lots from Liquidation.com when he needed an initial influx of merchandise, but he dislikes paying shipping costs, which bump up his cost of goods, so he will continue to source his goods through regional wholesalers.
Frodsham says his past purchases from Washington, D.C.-based Liquidation.com turned out well and helped him ramp up quickly with merchandise. In one purchase, he picked a couple of pallets of Revlon and other brands of makeup, paying 60 cents per item on goods that he retailed for $2 each. “They’re a good beginning source, but because we’re in Washington state, shipping costs have been a major obstacle,” he says. “The cost of shipping can be as much as the price of goods.” He dismisses eBay as a source because he believes its sellers offer only small lots of merchandise. And he says hadn’t even considered OverstockB2B.
Nonetheless, Frodsham notes that he’s open to more online purchases under the right terms. He says he may purchase goods through BigLotsWholesale.com, because it charges a maximum shipping fee of 10% of the price of goods, and will consider advantageous spot buys through Liquidation.com and OverstockB2B.
His objections are common among small retailers, experts say. Exchange operators contend that buyers sometimes over-estimate the cost of shipping. Liquidation.com looks for volume discounts in shipment costs and passes the savings on to customers, Haroon says. “Buyers have to keep in mind that in some cases the shipping costs may be as much as the price of the goods because liquidation prices are so low,” he says.
The exchanges say they’ll try to step up their value proposition as well as their marketing to retailers like Frodsham. Haroon says advertising and publicity materials will note the advantages of buying through Liquidation.com, including its ability to ship from different regions of the country to minimize freight costs.
Randy Hadeed, president of eAuction Solutions, whose United Traders unit handles auctions for several thousand products each week in eBay’s Wholesale Lots section, says retailers have an inaccurate view of merchandise available on eBay when they figure it only offers small numbers of products in any listing. “We regularly do auctions of up to 500-piece lots,” he says. He adds that anyone can find large offerings by typing the word “pallet” along with other keywords into the eBay site search mechanism. A single pallet, he notes, could contain thousands of flashlights or 100 or more toasters.
Hadeed adds that United Traders will also arrange for private auctions for retailers based on their particular needs. “If a merchant needs 2,000 or 3,000 pieces of women’s apparel, we’ll find the products, work out a price ahead of time, then complete the transaction over eBay,” he says.
Dismukes, who specialized in cost accounting during her banking days, says she has found Liquidation.com and eBay helpful to her overall buying and selling strategy. She’ll set a maximum bidding price in auctions that will leave her with a sufficient profit margin, regardless of shipping costs and possible markdowns late in the season, she says. And if she winds up with a bunch of designer dresses that won’t sell at the price she wants, she’ll auction them off through eBay’s Wholesale Lots section. “I’ll use eBay to sell higher-end pieces,” she says. “If it doesn’t sell in our stores, it’s a perfect eBay item.”
Fossil’s time for B2B
Although its watches are commonly sold through major department stores like Macy’s and Nordstrom, Fossil Inc. is also reaching out to small retailers. In a special business-to-business section of its web site, it lets them place direct orders and see data on what’s selling best in Fossil’s 80 U.S. company stores.
“We have several thousand small retailers as customers, and all they need is a web browser to order from us,” says Matthew Brown, director of e-commerce. And before they place an order, they can see which watches are the top sellers in each category.