Jon Hurst is the creator and innovator behind eAllyAvenue.com, a new online resource for distributors and manufacturers to connect in order to move slow or dead inventory to areas where it is needed - without eroding profits at the bottom line. Industrial Distribution spoke with him about this new venture and what it could mean for the industry and its members.
ID: What problem or need did you see that caused you to create eallyavenue.com as a solution?
Hurst: First, there wasn’t a source in which distributors could work together to exchange stock inventory while preserving profits. I searched up and down the internet and there was nobody out there doing this. What clued me in on the whole thing was that I would walk through a distributor and could hear the sales guys calling outside sales guys at other distributors saying “Hey, do you have one of these?” There is some reservations calling their competition asking for these things, but at the same time, I thought I would develop this website and now they wouldn’t even know who is on the other end of the transaction, just that they were getting what they needed when they needed it. Now we are expanding the site to be a national search as well, so it’s not just the guy down the road that you are checking with. Also, I saw with slow moving and stagnant inventories that distributors had, they were literally scrapping it or liquidating, even though there was still demand for that product in other areas of the country. The way I discovered this was calling on distributors or end users, saying “My distributor no longer carries this – do you know where I can get it? And right down the road I knew that they had it because I sold it to them. There was just no communication there. I said that looks like opportunity to me. There was no central means for locating stock inventory. Everyone was on their own as distributors. Bigger distributors have internal systems, but they don’t have a resource to go outside and be able to tap off of other people’s inventories. There are other advantages to being able to locate inventories. If you are quoted about eight weeks down the road by the manufacturer and your customer is knocking on your door wanting it now, if you can find it elsewhere and service your customer – you are a hero.
On the flip side, I’ve been responsible as a manufacturer’s rep to locate distributors for manufacturers so that they can set themselves up nationally. A lot of manufacturers just don’t know how to go about doing this or they just don’t know how or have the resources to find these distributors. This is a great way to have a manufacturer post their item on the website and open the door for themselves.
There are two sections to the site – a general section and a re-seller’s section. The second is exclusive just to sellers, resellers, and wholesalers and distributors. Manufacturers can post items on there but cannot buy anything off of this section. We are trying to preserve margins here. Vice versa, a distributor can post items in the general section with a profit built in and can sell to end users as well. We also designed the site so that manufacturers can expand their network of distributors throughout the country. A lot of distributors just don’t have the resources or the knowledge or don’t want to spend the money in creating an online catalogue. With this site, they can just post their items on their and they have instantly gotten their items out to the entire world wide web without any of the backroom IT issues to take care of.
ID: What is the website’s fundamental purpose?
Hurst: To create an online link in which distributors and manufacturers can partner up for the purpose of exchanging stock inventory to fulfill the demands of customers, for the purpose of making a profit.
ID: What is the procedure for a business utilizing eallyavenue.com?
Hurst: Obviously you have to register: not everybody qualifies. To qualify as a reseller, your primary business has to be wholesale or distribution. You cannot have any type of manufacturing within your organization. We’ve got to preserve that ability to make profits for these distributors. What you would get if you accepted people that also participate in manufacturing would be that they can now buy items from other distributors below cost that they would generally have to pay to use in their business. That’s a primary consideration when evaluating applicants for use of the site. This is strictly a business-to-business site. We review every membership, making sure they are legitimate. We do credit checks to make sure we have good paying members. There is both an auction and buy it now system built into the site. You can post your items in either category. There are four different kinds of auctions which we explain on the website in great detail. What those really do is fulfill the needs for the distributor because if they have different quantities to get rid of, it gives them the advantage to being able to break up the bulk and sell to multiple individuals, instead of having to offload it all at once to one buyer.
ID: Is there a fee associated with that process?
Hurst: Memberships are free. We don’t charge for application checks and there are no annual fees. We are just trying to get this network going.
The fees associated are tied into the transactions themselves. For example, a reseller transaction is 4% of the sale with a maximum of $1,500 commission, if we sell the item. For a general transaction, it is 12% with a $1,000 maximum commission. We can also set up private sales, like an auction or buy it now, like those that you see on shows like American Choppers who do a lot of charity work. The private auction proceeds can go to a charity if the business so desires, allowing them to write-off the item instead of taking a loss on it. The charge for those is 18% with a maximum of $1,500. There are smaller associated fees, and if you click on that section of our website you can see them all in detail. For example, listing fees are .30 per posting, adding a picture is a nickel. Additional options cost more as you add them on.
ID: What features does eallyavenue.com have? What are the benefits to members?
Hurst: A couple of unique features: we do the freight differently than most. You generally have to come up with a freight fee to post with the product. A lot of times, individuals will load up the freight fee, inflating it so that they make more on the freight than on the product, reducing the fees that they have to pay to the hosting site. This site is all business-to-business transactions, so we are eliminating that possibility. Ninety-five percent of businesses out there have an allegiance to different freight companies. On our site, the buyer is responsible for setting up shipping and delivery of the items. For example, if a business sells an item, there is going to a waiting period. Once we get paid through the site, we have a waiting period of 15 days. It gives them an opportunity to make sure everything is cleared out on the payment side. After a member receives their shipment, after 15 days and if everyone is happy with the transaction, then I release the funds out to the seller. This approach eliminates more paperwork for the seller, and the buyer gets to use their preferred vendor.
Everything one the site is set up for searching by model number, serial number or part number. You can search by those, by name, or by manufacturer. It’s a really strong search-based site. The only thing it doesn’t cover right now is the SKU number. We are working on it.
Because we are trying to set up a community of distributors and manufacturers and I saw so many different frustrations in locating inventory, eliminate the waiting on the manufacturer if someone else is sitting on dead inventory that you need. The solution for us was “Locater Lane” at the top of the website. Combined with “Future Watch,” it is an extremely powerful tool for the members. Locater Lane is a free tool to locate inventory. Future Watch is an automated notification system. If a distributor is looking for an item that has a long lead time, or even an obsolete item that is no longer being manufactured, then the member simply posts an ad for the desired items, and then all the other members know who needs what. A distributor who has it sitting in his inventory can see that as a sales lead and can then post those items for auction. If you register to be notified by email when an item becomes available through Future Watch, then when an item that you want is posted you will get an email telling you so.
The website can also potentially create cross-buying. If you are an electrical distributor and have a very good relationship with an end user, but that user gives you a list of things that he needs, says that he would love to be able to kick out just one purchase order for all of them. However, shingles are on the list – you don’t carry shingles. At that point, you can go to the website to either purchase or request that item. Once you purchase it, you become a one-stop shop for that customer, adding value for the customer who will most likely stick with you longer, while at the same time helping out another distributor get rid of unwanted inventory.
ID: How can eAllyAvenue.com help decrease the amount of value erosion that can result from stock dumping?
Hurst: Postings items on a consumer driven website opens the door for anyone to post and anyone to buy – they can take advantage of these types of sites to buy items cheaper, driving prices down. Most likely these items are being stocked in an area where someone has purchased them for pennies on the dollar and what happens is that they go to the users, sold cheaply and in bulk. However that local distributor has the same item, but his business gets killed because of the price erosion. Now, not knowing the reason, he has to liquidate his inventory at a loss. On eAllyAvenue.com, he can at least break even on that unwanted inventory by selling it to another distributor and not to a consumer.
ID: In a world where inventory management is costing companies dearly, how does eAllyAvenue.com look to be a solution to inventory control? Cost savings?
Hurst: We create master distributors. Take one distributor that posts items to the site. In this case he posts electrical wire to be sold by the foot. Hopefully you get multiple distributors pulling from that, one needing a hundred feet, one needing a thousand feet, and the more you get pulling off of it then demand is going to up considerably. He could increase the demand for his product tenfold, get a better discount from his manufacturer and increased purchasing power. He can increase his profitability.
ID: How successful have clients been in utilizing the website for its designed purpose?
Hurst: We are still pretty much in the infancy of the project. We’ve gotten excellent responses from distributors, and most clients that I talk to get really excited about what this could be become for distributors in locating and getting rid of unwanted inventory.
ID: Do you have plans for any upgrades in the near future? Website expansion? New features?
Hurst: Most definitely: one of the things we would like to do is try to keep the financing as much in the seller and buyer’s hands as much as possible. Down the road, I would like to see us developing merchant accounts to where a purchase is made and they can close it out with their own credit cards, developing their own little stores within the website. We are going to try to go international with this down the road, so that individuals can network globally. There is the possibility that we will set up freight brokering at some point. There are a lot of possibilities and directions in which we could take this.