TriMega’s Smart move?

 

Dealer group TriMega has raised a few eyebrows in theUSwith its acquisition of e-commerce site SmartXpress. opi.net spoke to SmartXpress co-founder Mark Hampton to find out what the deal means for TriMega’s members.

 

Mark Hampton says that phones have not stopped ringing since the news broke that TriMega was acquiring his SmartXpress e-commerce business.

 

"A lot of TriMega members are anxious to find out more," he told opi.net in a telephone interview this week. "The reaction has been largely positive, but at this stage it is really about providing dealers with more information and answers to their queries."

 

Hampton was quick to point out that dealers’ enquiry calls and emails have not been critical of the acquisition, rather they are simply seeking more information about SmartXpress and what it means to them.

 

"We have heard the view from some quarters that this acquisition means that TriMega is competing with its own membership, but that couldn’t be further from the truth," stated Hampton, who founded the e-commerce site with former United colleague Steve Schwarz in 2008.

 

SmartXpress was founded on a ‘one to many’ business model, engaging with professional associations and business groups to market the concept of their members buying their office supplies through the website.

 

Hampton admits that the business did not achieve the scale the two founders had originally hoped for in the timeframe they had set themselves, prompting them last summer to look for new ways of growing the business.

 

"We realised that we had a scalable model, but also understood that to get to the next level we needed to be part of something bigger."

 

Hampton says they looked at potential acquisitions, but that enquiries from independent dealers who were interested in acquiring the business – or at least using the site’s platform – prompted them to consider partnering with a dealer group and led to Hampton calling TriMega’s Charlie Cleary.

 

Following dealer feedback and market research, Hampton says both parties identified that independent dealers were struggling to win share in the online B2C and very small business segments: consumers and the ten million companies in the US with 1-5 employees who could potentially buy their office supplies online, or are already doing so via big box websites and online suppliers.

 

"This is a vertical that TriMega members have wanted to get into for some time, but have not had the technology or the resources to do so. This opportunity to allow dealers to capture share in a space that they are not participating in today is what led to the acquisition of SmartXpress," Hampton affirmed.

 

What this will basically mean is a change to the SmartXpress marketing model away from its B2B focus, or what Hampton calls the "old business", although he says that it will ultimately be up to the membership to decide.

 

"Members may choose to grow that [B2B] business, or they could decide just to move on with the new model and not throw any resources at the old business."

 

This "new model" will see SmartXpress moving into what is known as the ‘browser business’ – the business generated when internet users buy from websites after first having searched for products via a search engine such as Google.

 

The key to being successful in this space is making sure your website appears at or near the top of page rankings when consumers search for products. This will require an investment in search engine optimisation (SEO) to make the SmartXpress site geo-centric, producing favourable internet search results.

 

Hampton says the focus will be on organic search results versus much more expensive, pay-per-click marketing efforts. "We fully anticipate the three big boxes and established online e-tailers still coming up on the paid line in search results, but we want to see SmartXpress, on behalf of our independent member locations, coming up right under the paid line," he explained.

 

With this browser business becoming increasingly competitive, achieving that will be easier said than done. SmartXpress is currently in the process of selecting the best partner who will be responsible for ensuring the success of this organic search optimisation, and an announcement is expected shortly.

 

There will be actually no direct dealer involvement in the whole purchasing/delivery process. Consumers will buy products from the site and then the wholesale supply chain handles order fulfilment and delivery, with third-party carriers providing last mile delivery to the final customer. Even customer service will be handled centrally from Rosemont, so it will be a model that many dealers are not used to, especially the lack of contact with customers.

 

The argument is, of course, that the target customer is not one that a dealer should be spending time and money engaging with given the relatively low level of spend of each individual customer. The whole model is based on aggregation – the dealers leveraging their mass to achieve SEO success of a single site and an umbrella brand, and large volumes of smaller customers generating a high overall sales volume.

 

When larger customers – who may require a more personalised service – are attracted to SmartXpress, Hampton says that there will be a system in place to put these in touch with participating dealers, meaning the site has a secondary role as a lead generator.

 

Hampton admits that there are many aspects of the programme that still need to be decided and that things will become a lot clearer after consultation with a steering committee of TriMega members.

 

Some key areas of discussion will be the level of fees charged for dealers to participate, whether there will be some form of geographical territory allocation to dealers and how future profits will be paid out.

 

As Hampton concludes: "Where the SmartXpress business goes in the future isn’t going to be determined by myself or Charlie; it’s the members. How we build out the rules of engagement and how we engage the members will come from them, and no-one is going to have anything done to them unwillingly."

 

TriMega says it plans to introduce the SmartXpress solution to its members at their upcoming regional meetings beginning in early March.

 

TriMega’s move shares some similarities with the SupermarketOnline initiative started by UK dealer group Superstat at the beginning of last year. The most obvious similarity is the quest to win browser business by enabling dealers to join forces under a single umbrella site. This means that they can combine marketing spend in order to achieve high ranking search engine results.

 

But there are some important differences, too. The SupermarketOnline is targeting small businesses as opposed to consumers. Dealers deliver the products to customers and one of the selling points of the programme was to enable dealers to establish relationships with new customers.

 

Will SmartXpress be game-changing for TriMega? That will depend on how much the dealer group paid for the business in the first place. A lot will now rest on the level of engagement that it attracts from its members. With the programme to be self-funding, a higher number of participating members will presumably mean a lower individual membership fee.

 

The decision to acquire SmartXpress was taken with the backing of TriMega’s board, themselves independent dealers who obviously felt that there is an opportunity to generate a new avenue of revenue for members.

Taking that decision in itself should be applauded. Now the rest depends on how TriMega’s members react and how the group then executes.