Fairmarket Inc

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FAIRMARKET INC.

FairMarket Inc. is a provider of e-business selling and marketing solutions through dynamic pricing. Its customers include retailers, distributors, and manufacturers, and its offerings include automatic mark-down, auction, fixed-price, and merchandising tools. The company's main service offering, FairMarket Network, includes the development, hosting, and maintenance of private-label online auction sites. This consortium of Web sites allows companies to offer auction sites to their customers, increasing product exposure and allowing customers a wider selection. Without this type of service, companies would be forced to make steep investments in their own auction technology.

FairMarket Inc. was founded in early 1997 by Harvard Business School graduate Scott Randall in order to match buyers and sellers of computer products. The company gradually began to market software that supported person-to-person auctions, also called "community auctions," as well as business-to-person and business-to-business auctions, also known as "merchant auctions." Chairman Randall was quoted in Knight-Ridder/Tribune Business News as saying, "I came to the conclusion that auctions were going to be on everybody's site, and consumers were going to go where they were already going." Fair-Market then started outsourcing auction services and eventually created its auction network in 1999. The company's first clients included Microsoft's MSN, Excite@Home, and Dell Computer.

In an effort to sell large quantities of seasonal goods and excess inventories, companies are implementing FairMarket's auction method. InfoWorld explained the trend: "Many chief financial officers like the technology because it is subject to the truest laws of supply and demand, eliminating much of the guesswork in creating pricing strategies." Another benefit is the generation of traffic that auction technology creates, and when consumers find good prices in such a market, they are likely to return to search out another deal. In general, the more traffic on a Web site, the higher the advertising price on that site becomes.

FairMarket Network appeals to companies by handling the entire auction business, charging a monthly fee plus a percentage of the transactions conducted on their Web sites. FairMarket's clients either choose to distribute their auction listings to all members of the network, or to a select group of FairMarket-hosted sites, allowing for a targeted, private audience. If a person wants to auction off a set of baseball cards, the item can be made available to possible buyers on every other site that has a FairMarket auction, greatly increasing the item's selling potential.

In February 2001, FairMarket Inc. entered into an agreement with online auction giant e-Bay, which allows FairMarket's auction customers to list their auctions simultaneously on the 20 million-plus members' Web site. Mark Sutton, FairMarket's product marketing manager, discussed the deal with CNET News.com, explaining: "FairMarket has been all about helping merchants get their products out in front of different buyers. This helps extend that notion. We're putting those products in front of buyers in the biggest marketplace online."

One of FairMarket's largest clients is retailer J.C. Penney. This retailer considers its e-commerce business to be one of three major components in its distribution strategy: stores, catalogs, and the Internet. J.C. Penney wanted to use its auction site to increase the speed with which it moved clearance merchandise and reduce the expenses associated with regional outlets. FairMarket worked to help J.C. Penney realize these goals by tying its clearance site directly into JCPenney.com, ensuring a seamless shopping experience for customers. J.C. Penney's e-commerce vice president reported the results on FairMarket.com, stating: "Are we going to close all of our brick-and-mortar outlets this year? Absolutely not. But what we can do now—that we couldn't do before—is evaluate a new clearance model against the old. We've reached a scale that makes that kind of question possible. And that is a giant leap forward."

FairMarket client SAM'S CLUB, a major warehouse club, began utilizing the auction service in 2001 to test merchandise for selling price and popularity. The system also allows SAM'S CLUB to automatically identify and transfer products from its inventory system to the auction area of samsclub.com. FairMarket President and CEO Eileen Rudden explained these benefits on FairMarket's Web site: "Dynamic pricing adds both excitement and value to the SAM'S CLUB shopping experience. FairMarket enables SAM'S CLUB to maximize yield on a variety of merchandise while maintaining ownership of the consumer shopping experience." SAMS'S CLUB planned to expand its product offering to include overstocks and end-of-season merchandise.

Based in Woburn, Massachusetts, FairMarket Inc. has offices and offers online auction services in the United Kingdom, Australia, and Germany. Its e-commerce model provides a marketplace for vendors and a trading place for person-to-person sales. The network provides an extensive online audience to its clients and allows consumers to access auction resources through a single Web site.