Local Liquidator Flourishes in a Tight Market
While some firms are simply trying to stay afloat during this national economic slump, D.C.-based Liquidity Services is finding a booming market thanks to online bargain seekers.
The company has about 900,000 registered buyers, most of whom are small businesses. Liquidity sells overstocked or returned goods from retailers, including some Fortune 500 companies, and the government. Many of the small firms buy from Liquidity and then refurbish and repackage the goods to sell to customers.
About 6 percent of everything sold at retail is returned to stores, and that figure doubles for online retailers and catalogs, said CEO and Chairman Bill Angrick.
Angrick started with the firm in 1999 with a business degree, $100,000 of his own money and a keen interest in e-commerce that was cultivated while he worked at Alex Brown and Sons in Baltimore - a premier underwriter to growth firms going public.
"I had a front row seat to observe all of the exciting new ventures being created in the early stages of e-commerce, including Amazon.com, Trademarketplace and eBay," he said.
Angrick, who focused on entrepreneurship while at B-school, said he saw an opportunity to make a significant change in the reverse supply-chain market. "Retailers spend tens of billions of dollars on their supply chains, but when a product purchased by a consumer is returned, that side of the business is very unsophisticated and there's very little investment in [information technology]," he said. "We said, gee, here's an industry that's 25 years behind. We could introduce an Internet-based marketplace and create a professional sophisticated service offering value to sellers, returned merchandise and small business buyers."
He left Alex Brown in late 1999 and convinced his former college roommate to leave consultancy McKinsey and Co. They set up an office in Maryland and eventually moved to D.C. because of the talent pool, he said. At that time, the company had three co-founders and about four employees.
"Starting a business - a great business or even a good business -- takes five years to really take hold," he said. "It's important as a business owner that you've got to persevere and not quit at the first sign of adversity."
The company raised about $1 million in angel financing, and Angrick said it "was smart for us to retain control of our company" because after about May 2000 he felt it became difficult for many online firms to raise money. "Any business that didn't have a reasonable prospect to become profitable was shut down," often by controlling investors.
The company became profitable in 2002 by attracting public-sector customers. Eventually large retailers and manufacturers began to get on board.
On the public sector side, Liquidity started working with the Defense Department selling surplus goods in the United States at govliquidation.com and subsequently added scrap metal to that relationship, building an entirely new marketplace.
The company now has more than 1,800 federal, state and local agencies that use its marketplace to sell older goods on govdeals.com. "Municipalities are cash strapped and real estate receipts are down so they look at this channel as a way to double the value of their surplus equipment," said Angrick.
Today, the company has nearly 700 employees with an office in Scottsdale, Ariz., specializing in government sales. It recently acquired The Geneva Group based outside of London, which Liquidity hopes will give it a foothold in the European market.
While government contracts helped boost the firm's growth from the start, it's recently been fueled by the rapid advances in technology and a new environmental awareness among consumers and businesses.
"Tech innovations create product obsolescence," and big retailers always want to be selling the latest thing, noted Angrick. "In some cases there's new technologies replacing older versions every 12 weeks. The retailers want to get the new version to market and clear the older stuff quickly. That's where we come in."
A new national urge to recycle and reuse has also cultivated business. "Before, people didn't blink an eye to dispose of things as scrap, but that's not an acceptable alternative anymore," he said. "Big businesses realize that it's incumbent upon them to sell, re-utilize or recoup those dollars...Our solution is aligned with the idea of maximizing the value of items by finding a buyer that can take advantage of this product and extend its useful life."
The company, which has been listed on Nasdaq since 2006 under the ticker LQDT, handles purchases though e-check, wire transfer, PayPal or credit card transactions. Buyers pay for the shipment of goods that they bid on and all of the company's auctions have the weight, dimensions and packaging type posted next to the item. The company also has eight distribution hubs in places such as Cranbury, N.J., and Fullerton and Sacramento, Calif. Potential buyers can restrict their search to products housed in a particular distribution center that is close to the buyer's physical location and they have the option to pick up merchandise from one of the eight centers.
When asked what he's learned along the way, Angrick said entrepreneurs by nature are optimistic but "you can bet on change and you can bet on adversity when you go into a new business venture...You have to commit yourself to a multiyear endeavor...and it's a good filter for someone to say am I really committed to doing this and am I committed to stay?"
By Sharon McLoone |
July 10, 2008; 11:52 AM ET
Profiles in Entrepreneurship
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