Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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DollarDays, privately held with venture capital from Boston-based CP Baker and Co., doesn’t release revenue figures. But the wholesaler, which currently attracts more than 750 new customers daily, up from about 500 six months ago, to its DollarDays.com, set a record for sales in a single month when April sales increased 199% year-over-year, Joseph says. April also set a record for number of orders, rising 205% over April 2003, he adds. The wholesaler has been profitable for the past year, Joseph says.
DollarDays serves more than 187,000 U.S. merchants, including single mom-and-pop gift shops and small regional chains of general merchandise stores, Joseph says. About 10% of his registered merchants drop out every year, but at the current net rate of growth he expects to have close to 400,000 merchants by the end of this year. The online wholesaler offers about 30,000 consumer products, including toys, household décor, apparel, electronics and seasonal items.
When Joseph launched DollarDays in 1998, he sold to retailers partly online and partly through more traditional means of appearing at trade shows and making sales calls. He went completely online in 2001, about the same time he secured venture capital from CP Baker.
Joseph staffed his customer service department with 20 reps with experience as retailers-many of whom had operated their own businesses. The retail-veteran reps have proven key to the wholesaler’s growth, because they play a role in helping more merchants to make the shift from offline to online buying, Joseph says.
A new customer who is unsure of the online buying process will talk on the phone with a rep while each views the same web pages on DollarDays.com, and conduct a test run of filling a shopping cart. DollarDays encourages the new merchant to study the order overnight, then review it the following day with the rep to discuss how it could be modified to hit targeted costs and merchandise assortments.
Successfully luring retailers online can require flexibility to let merchants place orders and communicate with wholesalers as they choose, experts say. PriceMaster, for example, plans to re-design its site as a more useful tool for attracting clients. “Jobbers can order online in half the time it takes to order over the phone,” Rosen says.
It new web site will provide clients with more tools and data for managing orders and inventories. It will show what they ordered in the past, provide real-time availability of products and reminders on what they need to order, and show price histories to support analysis of prices and profit margins.
But PriceMaster will not force clients to order online. “A lot of our customers are old-school, not used to using the web, and some don’t even have web access,” Rosen says. But even the more technologically sophisticated customers still need human interaction, he adds, including jobbers who need help in explaining new products to retailers.
PriceMaster has also kept the automation of online orders to a minimum. Rosen will print out batches of online orders and hand them to sales reps, who then key in the information to order management software while calling the customers to confirm the order information, answer any questions, and at times suggest additional sales. “We have the capability to automatically integrate online orders with other software, but we don’t want to lose the human touch,” Rosen says. l
Getting to jobbers and retailers
The web is making wholesalers more nimble. Take PriceMaster Corp. Its core clientele is jobbers who sell to retailers. And, in fact, the web has made PriceMaster more attractive to jobbers, says Jeff Rosen, marketing director. They come for the same reasons that retailers do: the convenience, the selection and the prices.
But the web is also allowing PriceMaster to sell directly to more retailers because there are many areas of the U.S., mostly outside of major metropolitan areas, where jobbers don’t operate, and where there are growing numbers of retailers who, like jobbers, are finding PriceMaster on WholesaleCentral.com and other wholesale aggregator sites like Wholesale411.com. “The result is a net increase in sales to jobbers as well as directly to stores,” Rosen says.
“We’ve seen a tremendous increase in customer activity in the past year, and we expect even more,” Rosen says.
PriceMaster, however, trains its customer service reps to encourage new retailer clients to use jobbers if available. PriceMaster would rather deal with jobbers because they present the opportunity to sell larger volumes of products in fewer transactions. “An average jobber order is $3,000-$5,000, but the average store order is $500-$750,” Rosen says.
But as long as there are retailers without jobbers, the web offers the ideal way to sell to them, he adds. “If jobbers aren’t selling to stores in an area, we still want those retailers’ business,” he says.
What retailers expect from online wholesalers
The web is going to change the retailer-wholesaler relationship-and fast, says “Facing the Forces of Change,” a study commissioned by the Distribution Research and Education Foundation of the National Association of Wholesalers.
For instance, by 2008, 83% of wholesaler-distributors expect their retailer customers to require some form of electronic ordering, up from only 24% today. The study defines electronic connections as ordering from a wholesaler’s web site, through e-mail or through EDI, including web-based EDI.
The web will also continue to change the way in which retailers find and evaluate sources of products, the study says. It found that 53% of wholesaler-distributors believe that the Internet will become the most common channel for retailers to source products by 2008, and that 48% of wholesaler-distributors believe that the Internet will become the most common tool for retailers to evaluate multiple sources of products.
Merchants will also expect information about products and orders to be available on wholesalers’ web sites, as the web encourages a broader use of self-service tools. The National Association of Wholesalers study notes that by 2008:
- 33% of retailers will expect to have the ability to gather product information from their wholesalers’ web sites, up from 8% in 2003
-34% will expect to access pricing information online, up from 6%
-36% will expect to communicate with their wholesalers’ sales staff via e-mail, up from 14%
- 27% will expect to review purchase history online, up from 2%.