A discussion draft of the Online Sales Tax Simplification Act of 2016 is expected to be introduced in Congress soon.
To integrate or not is the question when e-retailers make acquisitions.
Shoppers at the web site of The Sportsman’s Guide, the spare and to-the-point retailer of hunting, fishing and other outdoor gear and apparel, probably haven’t noticed very many changes resulting from the site’s acquisition in 2006 by multi-channel retailer Redcats USA. And that’s not just because Redcats hasn’t gotten around to making them.
“I tend to be pragmatic rather than dogmatic,” says Redcats CEO Eric Faintreny. “If something is working, why change it?” Redcats owns a number of well-known apparel retailers, including Chadwick’s, Jessica London, Roaman’s and the recently acquired Avenue chain. The company doesn’t hesitate to combine web operations when the synergies are apparent; ten of its brands share space on OneStopPlus.com, dubbed “Your Online Fashion Mall for Sizes 12W to 44W.”
But Redcats purchased The Sportsman’s Guide to “get a leg outside the apparel industry” and strengthen its Internet capabilities, Faintreny says. “We’ve tried to find savings and role sharing where it makes sense, but the synergies are a small part of this acquisition.”
Online retailers acquire other retailers for myriad reasons: customer lists, inventory, brand names, marketing or tech knowledge, complementary product lines, new product lines. Combining two e-commerce operations into one is sometimes easy, sometimes difficult and sometimes unnecessary. Acquirers have to decide to what degree (if at all) they should integrate operations and staffs.
At The Sportsman’s Guide and its brother site The Golf Warehouse, Redcats has kept management teams and e-commerce platforms largely unchanged. Faintreny says the two sites are lending their e-commerce experience and expertise to improve the whole company’s Internet operations, especially in e-mail marketing. The company is also using The Golf Warehouse as a lab for testing multimedia capabilities and other strategies. Redcats, No. 28 in The Internet Retailer Top 500 Guide, had web sales in 2007 of $801 million.
Sportsman’s Guide is not utterly unchanged from the Redcats acquisition. It now sports a Furniture and Domestics department that wasn’t there before: cedar log furniture, yes, but also a retro-‘50s kitchen table and chairs and a Queen Anne bill-paying desk. Faintreny calls it a strategy for capitalizing on the long tail.
He notes that there will also be some swapping of merchandise from other Redcats properties; for example, some larger-size Sportsman’s Guide apparel will be carried on OneStopPlus.
Changing a business
Sears Holdings Corp. took a similar approach when it acquired the catalog and web apparel retailer Lands’ End in 2002. It made no major changes to the Lands’ End web site; the most obvious evidence of the acquisition was a Sears store locator. Years later, the Lands’ End web operation is still intact and Sears has launched its own apparel line on the web, using many of the merchandising touches, like the virtual dressing room, that Lands’ End pioneered.
PetsUnited LLC took a variety of approaches, some by choice, others by necessity. It has more than doubled its size by a series of three acquisitions since 2006, none of which has been handled the same way, says Greg Patterson, senior vice president of marketing.
PetsUnited, Hazelton, Pa., is famous for its stable of powerful domain names-Dog.com, Ferret.com, Bird.com, Horse.com and others. It made two acquisitions to create its horse offerings and one to bolster its bird inventory.
The first, Country Supply, was a turnkey operation and has stayed that way, Patterson says. “It was a unique purchase because it was bigger than all our other businesses put together at the time,” Patterson says. PetsUnited had purchased the domain name Horse.com and wanted to buy a catalog company that could take on that identity. Because horses are different from house pets, the company was looking for ready-made expertise.
Country Supply, a five-person operation out of Ottumwa, Iowa, had outsourced everything except buying the products, paying the bills and doing the merchandising. PetsUnited was already working with Communication Logistics Inc. in Plover, Wis., the company that was handling Country Supply’s web site and catalog. Only one employee chose to come over to PetsUnited-CFO Chris Van Doren, who stayed until the transition was complete and then returned to Iowa.
PetsUnited seamlessly took over the Country Supply web site and has used its online expertise to tweak its performance, add search engine optimization features and establish a successful community forum for horse owners. The other outsourcing arrangements remain intact as well. The Country Supply brand lives on, both in the catalog and on the web, though the CountrySupply.com domain defaults to Horse.com. As acquisitions go, it was fairly painless.
A second acquisition, Pet Stock Room, was more complex. It was a niche catalog for bird owners, with a specialty in parrots. “They had a strong following because they were innovative and had patented some of the products they had-like parrot towers with multiple pieces and toys,” Patterson says. Its web site was not as sophisticated as those of PetsUnited; for example, it had no analytics. “They mailed a catalog and traffic went up-that was all they could tell us,” he says.
PetsUnited couldn’t lure any of the 15 employees from Michigan to Pennsylvania, so it went to work completely rebuilding PetStockRoom.com, renaming it Bird.com, and bringing it in house. The company also bought the inventory, the catalog and the mailing list. It reduced catalog mailings from eight a year to four, and stepped up online marketing with an affiliate program, pay-per-click advertising and participation in comparison engines, all of which have increased traffic substantially. Meanwhile, the former owners turned their attention full-time to the creation of patented parrot products, which they supply to Bird.com.
PetsUnited’s last acquisition, State Line Tack, was perhaps the most complicated of all. It used to be the equine business of PetSmart Inc., which decided it no longer wanted an equine business. When PetsUnited acquired it in April 2007, the company had to absorb the inventory within 60 days, getting it out of PetSmart’s warehouse in Brockport, N.Y., and moving it to PetsUnited’s own warehouse in Pennsylvania.