Channel not sold on bargain website plan
- 30 June, 2004 16:29
The developers of a proposed online store are promoting the site as a valuable way for resellers to shed excess inventory. But it remains to be seen whether resellers will see it in those terms or as a direct competitor.
It’s a Bargain is aiming to launch more than 10 franchises during coming months, each with a separate product category ranging from sport and recreation or travel to home and garden or automotive.
The electronics franchise — which will be up and running before the end of the year if all goes to plan — will offer consumers a range of products from digital cameras and games consoles to PCs, notebooks and MP3 players.
The site will offer new products to consumers that are at least 20 per cent cheaper than the recommended retail price, according to the COO of Australian master franchisor, DRTV, Mark Robberds. This means the franchise owner is likely to be constantly on the hunt for end-of-line stock from IT and audio-visual resellers.
The priority now was to appoint the relevant franchisees, stock up and open for business.
“We are looking for an [electronics] franchisee that has been in the industry for a long time and has plenty of product knowledge,” Robberds said. “Maybe they’ve worked as a buyer for resellers or they’ve been selling to them.
“We will work with the franchisee to see what categories should be developed. Electronics is one of the key growth areas for buying online, and one of the areas where consumers are most savvy, but we don’t want to launch until we have plenty of quality product available.”
The key role of the franchisee, Robberds said, would be finding lots of excess inventory and discontinued stock that merchants were looking to release as quickly as possible at a low price.
“There’s a lot of fast obsolescence in electronics products,” he explained. “Some models are superseded when they are only 12 months old and are still capable of performing all the functions a consumer needs. From a reseller perspective, it’s another way of moving that type of stock.”
But general manager of marketing at Express Data, Peter Masters, said resellers were more likely to see the It’s a Bargain site as a competitor than a business partner.
“Ways of moving excess stock at a low price are already available in the market,” he said.
“I would think this website is more likely to be sourcing stock from vendors and distributors because most resellers don’t carry stock anymore.
As such, it will be competing with resellers.”
He also questioned whether the scheme was viable, suggesting online business models were much easier to draw up than to sustain.
“The biggest problem with something like this is execution,” Masters, said.
“We’ve seen a lot of models come and go despite having really good websites at the front end.
“There has been a long line of failures during the past five years, some with a lot of money behind them. There has been a tendency to underestimate the cost and difficulties associated with the back end.”
Managing director of Newcastle-based Forsythes IT, Jeffrey Hughes, said it would not be a great benefit to his reseller business because it did not hold a lot of inventory.
“We do have an amount of legacy stock but if it’s not moving through our existing channels I wonder if there is a market for it at all,” he said.
Leading Edge Computers general manager, Ross Whitelaw, said resellers would view It’s a Bargain as a competitor rather than an opportunity. “We have a facility within our group for members to move surplus stock but they don’t use it very much,” he said.
But Robberds said It’s a Bargain was on track to launch before the end of the year and, having conducted significant research into online retailing, claimed he had not come across any similar business models.
“There are important differences between It’s a Bargain and other online retailers,” he said. “Franchisees will not be holding stock. Furthermore, the franchise system itself means we have committed business partners rather than employees.
“We will also have a support network of people out there looking for bargain products to feed the franchises.”
Robberds said the online marketplace was now more mature than when other e-tailers such as dStore found life hard.
More consumers were now buying online than ever before, he said.
While the scheme, if successful, could provide the IT channel with an outlet for discontinued stock, Robberds said it could also be a business opportunity.
“A reseller with a lot of contacts might like to take this on,” he said. “We have only started looking for a franchisee in the past month but have already seen some strong interest.
“It would need a full-time commitment but there’s no reason somebody with an existing business couldn’t employ a manager to run the franchise on a day-to-day basis.”
Under the It’s a Bargain business model franchisees earn a commission of up to five per cent on the retail price. The company holding the stock until it is sold earns an agreed wholesale price.