Direct-to-Customer Commerce

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

GSI Commerce plans to acquire Innotrac

GSI Commerce (NASDAQ:GSIC) announced today that it has offered to acquire Innotrac (NASDAQ:INOC) for $4.03 per share, with an expected close in the first half of 2009.

Since Innotrac became the target of a stock fraud case a few years back, its financial picture has suffered, with about 30 percent of its stock held in receivership by a US District Court in Ohio.

That Innotrac was an attractive takeover target is not news, but it is interesting to see GSI Commerce continue to aggregate capabilities in the business processing outsourcing space.  Innotrac has a number of facilities, both customer contact centers and warehouses.  And certainly, Innotrac has an attractive client list.  Overall, Innotrac was an attractive target.

“Word on the street” was that while, Innotrac was basically getting the job done for it’s clients, they may have been losing the race to stay up-to-date technologically.  From the outside, it’s difficult to know whether that’s accurate or not.

On the other hand, while GSI is clearly the 800-pound-guerrilla in the space, it is also not completely free of complaints about its technology platform.  Client requested modifications are often perceived as excessively expensive and slow to come — pressuring clients to use what’s available rather than push for new features.

GSI’s acquisition of Accretive Commerce in Sep 2007 was partially driven by the success Accretive had in beating GSI in competitive RFP’s, based largely on Accretive’s partnership with ATG, which provided clients with a more highly rated ecommerce platform than GSI’s.

So, while GSI may have problems, you have to give them credit for aggressively clearing the marketplace of any potential competitors and making it more and more difficult for anyone to present a competitive offering.  There are better solutions available in the marketplace, but no one has stepped up with a vision and the money to bring it to reality.

Filed under: Direct Commerce, News, , ,

The Direct Commerce Services Industry

I worry a little that I’ll overstate this case, but here’s my primary point:

The service companies that support direct commerce seem to be in a transition.

The secondary question may be a transition into what?  And that’s truly relevant.  But being a consultant to the services companies, I’m struck by how many of my clients are asking themselves “what do we want to become?”

They’re making money, but are dissatisfied with the prospects for the future of their current business and see the need to rethink their business — who they market to and serve, what services they provide, how they manage their client relationships.

Of course, my view may be skewed because why do companies seek out consultants, except to help them with issues such as this.  So, please understand, I’m not complaining.

One thing that is also true is that the fulfillment industry, especially, continues (in general terms) to provide less than great service to their clients.  Clients move due to dissatisfaction with rates or services or both.  And many fulfillment companies cannot keep up with technology.  Their staffs are often undereducated in the needs and nature of the direct marketing services business.

And every service provider knows this:  Many clients have unrealistic expectations of how inexpensively services can be provided and how difficult it is to provide some services (blame this on marketing types who are often oblivious to the execution requirements of the marketing promotions they create).

Filed under: Direct Commerce, News

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