Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
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Dimone also searches for particular sellers he has bought from in the past. Liquidation.com lets retailers filter each category by sellers, as well as by condition, lot size and other criteria. Although retailers can search the site by seller name, Liquidation.com works to give buyers confidence in all sellers by physically inspecting the products that flow through its marketplace, says Bill Angrick, Liquidation Services CEO. The company analyzes those items, including the condition of the merchandise, in an auction manifest that describes the natures and type of goods.
The site also provides buyers a range of information about its sellers. “We want everything to be as transparent as possible,” says Angrick. “So in our auction view we have a rating of how that seller has performed.” The site shows buyers the average days to ship, the buyer dispute rate, repeat buyer rate and seller cancellation rate for 30-, 60-, 90- and 365-day periods.
Those data points are essential to quickly determine whether to make a bid, says Dimone. “I like to know who I’m buying from,” he says.
Partners, not competitors
Others came to online wholesaling through their experiences as retailers.
When John Olson founded pond and water garden online retailer GrayStone Creations in 2000, he found it hard to find wholesalers selling supplies. He quickly realized that few wholesalers sold those products-and the ones that he could find weren’t presenting them effectively online. So he had to seek out and develop relationships with a wide range of manufacturers and wholesalers.
He soon found that other pond and water garden retailers, like PondBoy.com, were contacting him to see if they could buy supplies from him. That led Olson to add a wholesaling channel. “We realized that if we bought in bulk, we’d get better pricing,” he says.
Rather than compete with the retailers he sells to, Olson works with client retailers to develop search engine optimization and paid search marketing tactics. For instance, he cultivates, and passes on, thousands of long-tail keywords for his customers’ pay-per-click campaigns. His thinking is the more they sell, the more he sells.
“With more than 30,000 terms applicable to our business, it would be inefficient and tedious for us to compete on every single one,” he says. “This way, if some sellers concentrate on terms applicable to their business, and others to a segment applicable to their business, everyone sees better results.”
With some of GrayStone’s bigger customers he forms deeper partnerships. For instance, PondBoy.com’s Gonzalez answers GrayStone’s customer service and technical calls. In return, Gonzalez, rather than Olson, receives the proceeds from any sales that result from those calls.
“I realize I might lose a little profit,” says Olson. “But I’m gaining it back because I sell to him at wholesale so it is not a complete loss. And, since I’m not on the phone all day, every day, I can work on things like SEO that bring money to all of us.”
Gonzalez says the partnership boosts his sales 20% to 25%. It also keeps him from shopping around for cheaper supplies.
Competing with the supplier
But not all retailers are as content with the way their suppliers have adapted to the web.
Take Ann Garrity, president of online organic cosmetics retailer Organic Divas LLC. When she launched her company in 2008, she aimed for the site to be one of the few places on the web to find natural and organic cosmetics free of cancer-causing or hormone-disrupting ingredients.
But since then each of the wholesalers she buys from has opened up a direct-to-consumer online store.
“They realized they could make more money selling direct to consumers rather than selling to us,” she says. Some of the suppliers even put stickers advertising their online sites on the products they ship to Organic Divas. “To use my distribution network to undercut me bothers me.”
Garrity says it is hard to gauge exactly how much wholesalers’ direct sales have impacted her business. But she has had several customers ask if her site can meet a wholesaler’s prices. Often she cannot. To compete with those deals, Garrity has had to expand her offers of percentage discounts and free shipping.
The competition has also led her to seek new suppliers. “We want to work with people who are working with us and have our best interests in mind,” she says.
Where does she find those suppliers? The Internet, of course.
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