TriMega’s Smart move?
Dealer group TriMega has raised a few eyebrows in the US with its acquisition of e-commerce site SmartXpress
Mark Hampton says that phones have not stopped ringing since the news broke that TriMega was acquiring his SmartXpress e-commerce business.
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 the acquisition means for 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 operation.
He says they looked at potential acquisitions, but that enquiries from independent dealers that were interested in acquiring the business – or at least using the site’s MBS Dev 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.
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 ensuring 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, as such producing more favourable internet search results.
There will actually be 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. Even customer service will be handled centrally from Rosemont.
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 individual spend. The whole model is based on aggregation – the dealers leverage their mass to achieve SEO success of a single site and an umbrella brand, and large volumes of smaller customers generate a high overall sales volume.
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.
TriMega says it plans to introduce the SmartXpress solution to its members at its upcoming regional meetings beginning in early March.
The group’s move shares some similarities with last year’s SupermarketOnline initiative from UK dealer group Superstat. 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 concept 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. As the programme will 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 that obviously felt there is an opportunity to generate a new avenue of revenue for the group’s 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.