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Strategic insights into the direct commerce industry, including ecommerce, direct marketing and related fields

It’s hard not to comment about this

The AB&C Group, a third-party fulfillment and customer service provider, shut it’s doors Friday, March 14, 2008. Multichannel Merchant carried a story on March 19, questioning what would happen to their clients.

Now, in the name of full disclosure, I must state that I worked at the AB&C Group from 1993 to 1999. When I left, I was Chief Operating Officer.

In 2006, Blue Sky Brands bought the company from it’s sole shareholder.

Blue Sky Brands was funded by venture capital. At the time of the AB&C acquisition, they owned at least two catalog titles, Paragon and Bits & Pieces. Since the acquisition, they’ve acquired additional company-owned titles: National Wildlife and Wintherthur. They continued to service clients they had before the acquisition and picked up additional clients along the way. Most recently, the Smithsonian Catalog moved to AB&C in the summer of 2007.

Informal reports I heard suggested that the company-owned catalogs did not perform well during 2007Q4. Although the AB&C employees, with whom I’ve spoken, said the company maintained service levels for both internal and external clients thru the holiday period.

The cause of the company’s collapse is apparently the failure to secure the additional financing needed to maintain operations thru the traditional valley of late Q1 and Q2.

I don’t doubt that report.

AB&C’s collapse is sad to watch, both personally and professionally. Personally, because a bunch of hard working people lost their jobs, thru no real fault of their own.

Professionally, because it’s another black mark on the outsourced fulfillment industry. The clients who were at AB&C are faced with rushing to find new vendors, rushing to just survive. It will not be a pretty transition.

I consult in what I call Direct Commerce Operations — and the outsourced segment of this industry suffers from under-capitalization and relatively low margins. Not a very attractive investment for venture money.

I certainly don’t know the details behind AB&C financial ills, but, if venture capitalists are going to continue to invest in this space, they need better advisors — for the sake of their investors, their portfolio companies, the clients of those companies and the employees of those companies.

Filed under: Direct Commerce, Uncategorized

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