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Web Site Targets Overstock to Specific Buyers

Posted on: Wednesday, 27 July 2005, 15:00 CDT

Jul. 27--The hundreds of G.I. Joe toy submarines, turbo choppers and missile launchers in a Morristown warehouse faced a tough assignment. They needed to go on semi-stealth sales mission around the world, keeping themselves hidden from a select few, while capturing the attention of enough buyers to maximize returns for their executive officers at Hasbro.

But they had a high-tech weapon on their side: TRV -- targeted restricted viewing -- a patent-pending software application developed by the company that brought the G.I. Joes to Morristown. That company, LiquidXS, is one of a growing number of liquidation companies that are using the Internet to match closeout merchandise with retailers.

Just as individual sellers have turned to eBay to maximize prices for castoff collectibles, liquidation companies are using the Internet to find buyers for merchandise that manufacturers overproduced, or that retailers couldn't sell.

Other players in this field include Canada-based Ableauctions.com and Liquidity Services Inc., based in Washington, D.C. Liquidity Services employs 285 people and handled more than $75 million worth of online auction sales for businesses and government agencies in 2004, according to a company representative.

LiquidXS executives, however, believe they offer something that sets their company apart from other online liquidators: the ability to prescreen buyers and block sales to dollar stores or other deep-discount merchants that could hurt a brand's image.

For example, an upscale gift manufacturer that doesn't want to see its excess stuffed animals on the shelves of dollar stores could specify that they be offered only to independent gift shops and European toy stores.

That screening ability could give LiquidXS a valuable niche in the online liquidation world, said Andrew Bartels, research analyst for Forrester Research.

Manufacturers who are disposing of merchandise "obviously want to do so in a fashion that is not going to compromise their brand or compromise their other channels of distribution," Bartels said, adding that being able to restrict potential buyers "clearly could be a very attractive proposition."

The Web site also enables LiquidXS to offer closeout bargains to small merchants who in the past -- when business was conducted by phone -- weren't offered such deals because they didn't buy in volume. This year, the company relocated its main warehouse from Memphis to Morristown, partly to better serve small-business customers who buy by the caseload, instead of by the truckload.

"The technology allows us to show the manufacturer's product to the widest possible audience," said Gregg Greenberg, vice president for e-commerce at LiquidXS. "Instead of a manufacturer calling just a select group of companies, we reverse it and say 'Well, who shouldn't we contact?'"

LiquidXS founder Dan Wise worked in the traditional closeout business for more than 10 years before creating LiquidXS.

"I saw a dramatic need to create more efficiencies in an old-world space," he said. "LiquidXS has been a big part of bringing Internet technology to an industry that has been historically slow adopters."

The LiquidXS Web site allows manufactures to restrict who can see their goods by company name, class of trade or geography. A manufacturer, for example, could specify that he doesn't want his merchandise viewed online by Wal-Mart buyers, dollar stores or any buyers in Europe.

Buyers have to be registered members to use the site. Membership is free, but the member's identity and business is verified by LiquidXS's customer service staff, Greenberg said. The company has nearly 5,000 registered members.

"The manufacturer knows that they're protected and knows that we are looking out for them. And that's why we have such successful relationships with the major manufacturers," Greenberg said.

LiquidXS specializes in toy and housewares closeouts.

A private company that doesn't reveal its revenues, LiquidXS earns its money by keeping a percentage of the final sale price. It is offering more than $21 million worth of merchandise for sale, Greenberg said. The company, unlike other Internet liquidators, doesn't conduct auctions, and sets the offering prices with the manufacturer before posting the merchandise on liquidxs.com.

Buyers can search the site for specific products, or specify that they are looking for "all items at 50 percent off wholesale" or "all items priced below a certain amount."

Eric Sacks is president of Smallappliance.com, an online appliance retailer and appliance repair business based in Oceanside, N.Y., and a LiquidXS member.

"We look at them for opportunities," he said. His company mostly buys directly from manufacturers but looks at the LiquidXS site on a weekly basis for special deals, or items it can use for promotions, or gifts-with-purchase. "We bought some Farberware knife sets from them recently and I think we're currently using it as a gift-with-purchase with some KitchenAid mixers, or something like that," he said. "We use them for opportunity purchases so we can add value to the product that we're selling."

Bartels said the key challenge facing LiquidXS, and all online liquidation sites, "is getting the buyers and sellers to come. You need to have both a sufficient pool of buyers and a sufficient pool of sellers to be successful."

They also have to worry about competition if they make what they do look too easy, Bartels said. Some of the LiquidXS members are eBay retailers who buy closeouts, then resell them to consumers.

"EBay itself could look at this potentially and say 'Gee, we could be doing this as well,'" Bartels said.

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Source: The Record - Hackensack, New Jersey

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