Pop-up Purchasing Agents

  • Written By: D. Geller
  • Published On: April 18 2000



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Event Summary

OutPurchase.com announced a full range of purchasing services for small and mid-sized companies; these are typically companies with between ten and 500 employees. OutPurchase.com offers more than a connection to a purchasing marketplace. They promise the same services that larger companies get from in-house purchasing departments, including

  • Sourcing

  • Vendor Qualification

  • Pricing

  • Fulfillment Management

  • Decision Support

  • Returns and Servicing

  • Financing

  • Reporting

The company develops technology and employs purchasing professionals to qualify vendors and track their performance history. The staff also negotiates aggregated pricing and handles returns and service issues for their customers. The company monitors the quality and responsiveness of its suppliers and CEO Jim Stovell proudly relates that they have already removed a Fortune 500 company from their approved vendor list because of a poor performance record.

The company emphasizes access to high quality, competitively priced indirect materials, reliable and accessible customer service, and on-time delivery of goods and services. Every customer is assigned an account manager who helps familiarize the customer with the website, does set up and training (over the phone), and is available for assistance when needed.

By providing a large buying base and handling service calls for its members, OutPurchase.com has been able to land important partnerships with companies like Boise Cascade and Ingram Micro. American Express is another partner (and a strategic investor), attracted to OutPurchase.com by opportunities to integrate its financial services with a purchasing solution that has generated significant early adoption. American Express and OutPurchase.com will be jointly marketing their combined solution to American Express's substantial base of small and mid-sized business clients.

In addition to the benefits provided to its customers OutPurchase.com offers value to suppliers as well, in the form of consolidated and repeatable access to an enormous but fragmented marketplace.

Moving forward the company intends to introduce other services that fit into its goal of providing its customers with the "world's greatest purchasing department." OutPurchase.com, which was founded in 1999, claims 30% month-to-month customer growth and over 80 employees. The company's major source of revenue is transaction fees on purchases. OutPurchase.com makes a profit on individual transactions and is on track toward corporate profitability.

Market Impact

Outpurchase.com is creating a new business model. Unlike companies that offer access to a purchasing marketplace - whether one of their own like Dell or Staples, or a larger aggregated market such as those offered by Concur or works.com, OutPurchase.com manages the entire purchasing process for its clients. As new features roll out it will prove to be a formidable alternative to the model used by many companies of having an office manager be responsible for ordering and a programmer responsible for buying computers.

We expect that many small and mid-sized companies that are now looking at joining digital marketplaces as the next step after bookmarking half a dozen different supplier sites, will be very attracted to OutPurchase.com. The keys to success will be, first, persuading smaller companies that there is real value to outsourcing a function that they had no expectation of creating in-house and, second, having the flexibility to respond to the specialized requirements of the larger companies in their target space.

User Recommendations

The value propositions here are reducing the amount of time spent managing the vendors and the purchasing process, lowering costs of goods, improving access to quality suppliers, and a simplified procedure for handling service issues, especially with computers. Any company that has been handling all of this themselves will find it worth their while to investigate OutPurchase.com. Discuss with this service provider the product and service categories that are currently under development to see whether they also promise value to your company.

We note that one difference with the digital marketplace model for smaller companies is that OutPurchase.com will not provide an easy route to entering e-commerce as a supplier. A company planning to enter into e-commerce might choose to be a purchaser in whatever marketplace it becomes a supplier on, if only to understand the experiences of its customers. This might limit the appeal of OutPurchase.com to these companies, but even they might still be lured by the added value that OutPurchase.com promises.

 
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