Net traffic flocking to bargain centers

Associated Press

BOSTON — Recession? Not in the bustling back-room buying office at Smartbargains.com.

Crowded between racks of sample Gucci handbags, cashmere sweaters and Toshiba digital cameras, the company’s Boston-based buyers work the Internet and phones, eyeing excess inventories from manufacturers, overstocked stores and failing e-tailers.

Smartbargains and competitor Overstock.com say business for the Web closedown industry — where sites resell excess inventories and canceled orders at deep discounts — has never been better.

The industry is consolidating around a few sites, deals with Web portals have brought huge increases in traffic, and a wave of cheap goods from defunct Web sites and struggling retailers is filling the pipeline.

Plus, the companies say, the economy has left consumers more bargain-conscious, and the terrorist attacks may have them staying closer to home.

"When you buy online from home, you buy from the safety and security of your own home," said Smartbargains chief executive Carl Rosendorf. "That’s a factor today."

Some experts are skeptical these sites will ever serve more than niche markets. Still, several have seen big jumps in traffic just in the last two months.

Boosted by a portal agreement with America Online, Smartbargains’ site’s traffic jumped 335 percent in September over the previous month, The company has jumped from No. 215 to 67 in rankings by research firm Jupiter Media/Metrix of e-commerce site traffic. Sales rose 85 percent.

At Salt Lake City-based Overstock.com, the 10th largest retailer on the Web, traffic rose by about 1 million unique visitors per month in September to 5.5 million. CEO Patrick Burns expects a 60 percent increase in sales to $8 million in October. For the year, he expects $100 million in sales, down from previous hopes but far more than the $36 million last year.

"I think we did meet some kind of critical mass," says Burns, who feels vindicated after being "the only guy walking around Silicon Valley who couldn’t raise money in 1999."

Sales at upscale site Bluefly.com are also somewhat higher, though it faces continued financial problems and its stock is mired at about $1 per share.

Much of the liquidation business is still in the hands of old economy liquidators and bricks-and-mortar discount chains such as Tuesday Morning and T.J. Maxx.

Earlier this month, T.J. Maxx parent company TJX Corp. reported September sales were up 10 percent over last year despite the drop immediately after Sept. 11. The company gets most of its merchandise through "opportunistic buying," said spokeswoman Sherry Lang.

"There never has been a time where there has not been enough goods for us," Lang said. "That said, there is an abundance of great buys out there right now."

Meanwhile, many of the Web sites that tried to break into the space have gone under. But backers insist the survivors are well positioned, and with their speed and reach offer an efficient way to match companies with excess goods and bargain-hungry shoppers.

Among the recent discounts at Smartbargains was a Gallery leather jacket for $99.99, down from retail of $375. Overstock featured a Tiffany-style table lamp retailing for $199.99 for $49.99, and at Bluefly.com a Prada shoulder bag went for $249, or 50 percent off the retail price.

The sites are carving out their niches.

Overstock, which offers about 4,000 items at one time, is trying to appeal with a broad selection. Smartbargains, with about half that many items, is looking for the selective bargain shopper. Bluefly focuses more on high-end goods.

All three are facing competition from eBay, which is increasingly being used by companies to sell excess inventory directly to consumers. Spokesman Kevin Pursglove says the company has anecdotal evidence of more corporate sellers, but says the company doesn’t track those who sell on its site, and notes that corporate sellers might not identify themselves as such.