Surfing to Spark Market for Surplus Supplies

SAN MATEO (03/17/2000) - Excess inventory and used assets are every corporation's unwanted baggage. The castaway goods tie up capital, hog warehouse shelf space, and drain management time.

Traditionally, businesses have had to rely on an odd collection of liquidation firms, auctioneers, and brokers -- many of them focused only on specific regions of the country -- to shed unwanted merchandise and used goods.

With some exceptions, the old-style approach hasn't exactly been the model of efficiency, with hawkers relying on advertisements in trade journals, personal connections, phone calls, and a flurry of faxes. The word-of-mouth-driven exchanges have left many wares unsold or dumped at lowball prices.

Now a new breed of business-to-business Web services pledges to sell excess inventory and used assets faster and cheaper than traditional liquidators and brokers by matching buyers and sellers online. Buyers and sellers need only a standard Web browser and Internet access to participate in most of these secondary e-trading exchanges.

"People come to us to get efficient, fast access to the marketplace," said Dermott F.X. Ryan, vice president of marketing at TradeOut.com, an Ardsley, N.Y.-based surplus marketplace that's backed by the hot consumer auction service eBay Inc.

The emergence of these marketplaces is significant for IT professionals scouting for Web opportunities for their companies as well as those who simply want to retire computer hardware and telecommunications gear or pick up a deal on used equipment.

The market for these secondary e-trading marketplaces is considerable.

TradeOut.com estimates that the market for excess inventory and idle assets is $350 billion.

Eager to cash in, a growing number of companies are vying for a piece of this virtual turf, including pure-play Web auctioneers, procurement and catalog sites focused on particular industries, and traditional liquidators and auction houses extending their services online.

The marketplaces are already consolidating. FreeMarkets, an online business auction company based in Pittsburgh, announced this month that it agreed to acquire iMark.com, a privately held business-to-business online marketplace for surplus equipment and inventory based in Austin, Texas.

Together, they expect to form FreeMarkets Surplus Asset eMarketplace, boasting a global network of buyers and sellers that claims more than 20,000 registered users, $265 million in posted assets, and over $28 million in asset sales to date.

The approaches of the secondary e-trading marketplaces vary considerably, particularly in the type of goods they peddle and whether they actually take possession of the goods or just post a description of them. The services also differ on the level of hand-holding and offline help they give to check on buyers' credentials, match sellers with buyers, and handle the transaction.

Most services are too new to have much of a track record. Yet all highlight the same selling points.

By opening the sales to the global Web audience, these services claim they'll stir competition and help sellers wring better value out of the goods.

Meanwhile, they claim, buyers will spot bargains they otherwise might have missed.

"The Web is good at [solving] the needle-in-the-haystack problem," said Bill Angrick, chairman and CEO of Liquidation.com, based in Washington. "We're selling printer cartridges from Canada to South Africa and paint from New Jersey to India."

Hewlett-Packard is selling Unix workstations, servers, and storage gear through ZoneTrader.com. The hardware includes goods that the computer manufacturer leased or distributed as demonstration models.

In the past, HP sold the goods to brokers for pennies on the dollar, said Doug Moffat, strategic sales and channel manager for Hewlett-Packard's finance and complements group in Mountain View, Calif. In contrast with ZoneTrader, HP is basically getting quarters on the dollar back, he said.

More importantly, and unlike most secondary e-trading marketplaces, Moffat said, ZoneTrader handles all of the back-end details. Formerly a computer reseller operating under the name Workstations International, ZoneTrader collects and tests the goods, refurbishes systems, backs its work with a guarantee, and sells the goods on consignment.

ZoneTrader also offers an electronic tie-in to customer ERP (enterprise resource planning) systems.

"We are relieving pain from a painful process," said David Gigerich, ZoneTrader.com's chairman and CEO.

At the moment, ZoneTrader focuses on surplus and refurbished computer hardware and telecommunications gear. Later this year, it will begin selling machine tools and logistics equipment, Gigerich said. This month, ZoneTrader inked deals with Ford Motor and Dow Chemical Company to dispose of excess capital goods. Both the Dearborn, Mich., automotive heavyweight and the Midland, Mich., chemical giant have announced that they are also investing in ZoneTrader.com.

Some sites allow sellers to peddle goods anonymously, but others do not.

Depending on the sites' rules, a seller may opt to sell to the highest bidder or set a minimum price.

Winners generally receive notice via e-mail. Typically, arrangements for pickup and delivery, along with payment details and terms, are made between the buyer and seller. Some of the marketplaces offer such mechanisms as escrow services to ease concerns that the buyer will renege on the purchase.

Sellers typically pay a fee and a percent of the transaction to list their products. Buyers, as in many other Web services courting trade, generally pay nothing. TradeOut, for example, charges sellers $10 per listing and a 5 percent commission on the sale.

Still, critics question whether the online services can consistently deliver more value to the customers than traditional ones. Corporations might make out better financially, for instance, by donating old computers to charitable organizations and getting a tax break rather than trying to sell old machines through the Internet, said Adam Couture, an analyst at the Gartner Group, in Stamford, Conn.

Before signing on with an exchange, experts say, customers will want to consider the value-added services, the expertise, and the audience of the marketplace as well as the fees and traffic they draw.

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