Increase In Online Liquidations Presents Opportunities And Challenges, Davis Says
--Veteran Tiger Group appraisal director highlights issues in ABL Advisor article
BOSTON, June 17, 2013 /PRNewswire/ -- An increase in the number of e-tailers seeking loans from asset-based lenders and the rise in brick-and-mortar store inventory dispositions that include an e-commerce component present new opportunities and challenges for liquidation firms serving the ABL industry. While the goals of Web-based liquidation sales and brick-and-mortar dispositions are the same - generating maximum recovery values for the lender - the specific considerations involved in each can be quite different, writes Ryan Davis the Boston-based director of appraisals for Tiger Group, in a blog post published on June 5 in The ABL Advisor.
For example, the liquidation firm can face a particularly vexing challenge when the debtor's IP assets are acquired by a third party during bankruptcy, since the purchaser gains exclusive rights to the brand's Internet domain. This prevents the liquidator from using the most logical online channel - the brand's primary Web address - as a venue for Internet-based sales conducted in the course of the liquidation.
"The good news is that the liquidation firm can make a creative play in which it enlists a third party - such as an online fulfillment service or comparative-shopping network - to drive Internet-based sales of the remaining inventory," writes Davis. "So long as such strategies do not threaten the value of the brand, they tend to be acceptable to the court."
Today's liquidators also need to be adept at leveraging the rapidly evolving marketing methods of the Web, including banner ads, pay-per-click advertising, affiliate marketing and email blasts. With that, the firm must be cognizant of the dos and don'ts associated with each of these approaches. "As retail or e-tail borrowers start to get into financial trouble, the temptation grows for them to, in effect, abuse their customer lists by emailing their shoppers too frequently, as well as by sending them too many low-value emails," Davis writes. "The liquidation firm might face the same temptation as it launches an email marketing campaign."
To that end, he warns that email distributions with high volumes and low click-through rates may be classified as spam by major email services. If this occurs, the liquidator might find that its email messages are being metered out by the spam filter at a painfully slow pace or they could be blocked entirely, forcing the firm to prematurely ramp up discounts in a bid to bolster the response rate and get past services' spam filters - thus, impacting the gross orderly liquidation value (GOLV).
Davis also advises liquidators to pay careful attention to the borrower's relationship with essential third-party services that provide Web hosting, email, computer coding, customer-list management and shipping. If UPS or FedEx, for example, refuse to ship until they get a check, the liquidation would not be able to proceed in a timely manner.
"E-retailing's extraordinary growth means that such considerations will loom ever larger for the ABL community," Davis observes. "Indeed, the topic of best practices regarding Web-based liquidation sales is already generating considerable discussion. This is rightfully so, because the Internet clearly represents a tremendous opportunity for our business. To that end, our retail expertise should encompass not just Main Street and the mall, but the digital dimension as well."
To read the full article, go to: www.abladvisor.com/featured-blogs.
About Tiger Group
Tiger Group provides advisory, restructuring, valuation, disposition and auction services within a broad range of retail, wholesale, and industrial sectors. With over 40 years of experience and substantial financial backing, Tiger offers a uniquely nimble combination of expertise, innovation and financial resources to drive results. Tiger's seasoned professionals help clients identify the underlying value of assets, monitor asset risk factors and, when needed, convert assets to capital in a variety of ways quickly and decisively. Tiger's collaborative and no-nonsense approach is the foundation for its many long-term 'partner' relationships and decades of uninterrupted success. Tiger operates main offices in Boston, Los Angeles and New York. To learn more about Tiger, please visit www.TigerGroup.com
SOURCE Tiger Group
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