Smartbuy partners with the postie

Australia Post fulfilment service Sprintpak will form the backbone of e-tail Start-up Smartbuy in a move away from traditional IT distribution.

Smartbuy has announced the company has signed a memorandum of understanding (MOU) with Sprintpak for it to provide outsourced tracking services, specialist packaging and goods despatch from its Villawood, Sydney facility. The move follows an aborted partnership with Dataflow and comes after Smartbuy evaluated potential partners such as Tech Pacific, Express Data, and non-IT distributors such as TNT and e-Fill.

Smartbuy will also lease warehouse space from Australia Post to store products from some of the e-tailer's suppliers who lack the sophisticated e-commerce facilities needed to participate in the exercise. The company will also use the services of Australian Air Express, 50 per cent owned by Australia Post.

According to Smartbuy managing director Tony Gattari, the MOU is the first step to signing a commercial agreement within six weeks, once pricing issues have been finalised.

Once in operation, a customer order will travel from Smartbuy to the product supplier's distributor, which in turn will ship the product to Sprintpak.

Sprintpak will then ship direct to the customer via Australia Post. The company also boasts a system of cross docking where products from different distributors, together with any from its own warehouse, will be packed together to give a customer a single delivery.

"I'm led to believe we're one of the pioneers for Sprintpak," Gattari said.

The announcement comes at a time when many dot-com investors are losing faith in e-tail operations. In fact, falling investor confidence and the fallout from Smartbuy's aborted partnership with Dataflow, have delayed Smartbuy's official launch, expected in the coming months.

According to Gattari, his investors - Allco Finance Group, Brait Capital and Hambro-Grantham - remain confident with Smartbuy because it has changed its business model.

Gattari is also hoping the partnership news will reassure his suppliers. "It's pretty important [to communicate] that we are still in existence."Meanwhile, Smartbuy is clearly happy to have found a distribution and fulfilment partner outside the politics of IT distribution. "Australia Post is non-conflicting. It is not going to upset anybody," Gattari said.

With obvious reference to the furore caused by his partnership with Dataflow, Gattari commented in a press statement: "Suppliers are sometimes uneasy about sending their product to be stored in the warehouse of a traditional distributor who may also be their direct competitor. With Sprintpak this is obviously not an issue."One of Smartbuy's industry peers and competitors, estore MD Steven Spilly, told ARN his concern centres on Smartbuy's intention to hold stock.

"As far as the fulfilment service goes, I'm sure Australia Post will have no problems. The problem lies in the fact that they are trying to be an e-tailer with a retail model."Spilly added that he was "baffled" as to why companies like Smartbuy persist with the idea.

"The perfect e-tail model is cash positive, the supplier holds the stock and sends it out on demand. If you have to pay for holding you're sustaining massive expenditure. You can't run an e-tail business on a retail model. Even Harvey Norman has said this isn't working for them. Toystore tried it and they just went broke.

"We'll never hold more than 50 pieces of stock here at the one time, but at the same time we are sometimes the only one who has stock of products."