Inventory liquidators and auction firms
pick at the bones of failed dot-coms and get rich in the
proc-ess. What's wrong with that?
When Overstock.com CEO Patrick Byrne learned that online jewelry
retailer Miadora.com was closing last fall, he flew to San Mateo,
California, and handed his business card to Richard Caniglia, vice
president of operations. On the back were three little words that
captured the embattled Caniglia's eye: "I have cash."
Within days, Caniglia agreed to sell Byrne inventory worth $12
million at retail prices, goods for which Miadora had paid $5.5
million wholesale. Byrne's price? $2.5 million. His plan? To sell
it on his Overstock.com Web site for less than wholesale price, as
he's done with everything from baby items and sports gear to ISP
and phone service, some of which were picked up from defunct
Such are the lives of inventory liquidators and the companies
they're buying from these days. Byrne and his ilk have found the
pickings almost obese with opportunity over the last several months
as once high-flying e-commerce companies fell to their deaths, and
the online-retailer liquidation business is likely to get even
better through year's end, analysts say.
The business press has long used the metaphor of the vulture to
describe companies like Overstock.com, but Caniglia doesn't view
Byrne with the distaste humans usually assign to carrion-eaters.
"He's a benefit to the creditors," he says. "He gave a very fair
price to the creditors of Miadora and helped bring some of the debt
down and was very businesslike about it."
There's no doubt that successful inventory liquidators like Byrne
are opportunists who recognize signs of weakness in companies early
enough to step in and cut a deal (some might say to take
advantage). Their ability to think on their feet and act quickly
are key, as is a gut instinct for recognizing value. The real
players in liquidation attract a grudging admiration from other
business people, despite their habit of circling the dying.