More and more, when GE Capital businesses need to sell off-lease assets or surplus inventory, they are doing so online - with the help of strategic alliance partner TradeOut, the leading online business-to-business marketplace for buying and selling excess inventory and idle assets.

The Booming Business-to-Business e-Commerce Sector

By 2003, one-fourth of all U.S. business-to-business purchasing - a transaction value of approximately $2.0 trillion - will be done online. So predicts Boston Consulting Group senior vice president David Pecaut. And as co-head of BCG's global e-commerce practice, he ought to know. In a recent research study, BCG predicted that by 2003, business-to-business - or "B2B" - e-commerce would account for 24 percent of total B2B commerce, with 65 percent of transactions occurring in six sectors: retail, motor vehicles, shipping, industrial equipment, technology and communications, and government.

For traditional "bricks-and-mortar" companies, particularly those in the aforementioned sectors, those statistics are very sobering. Selling a pair of pants or a jacket online is one thing. Selling hundreds of used trucks or trailers or shipping containers is quite another. And as many companies have discovered, just having a Web presence is not enough. You need excellent marketing, an Internet-savvy management team, and a solid e-commerce model.

Few companies, even companies the size and scope of GE Capital, are prepared - or have the time, money, and resources in place - for such an undertaking. That's why when GE Equity was looking for an online B2B investment and partner they turned to Valhalla, New York-based TradeOut.

The eBay of B2B e-Commerce

With the success of business-to-consumer - or "B2C" - online auctioneer eBay and the growth of B2B e-commerce, a B2B version of eBay was inevitable. EBay president and CEO Margaret "Meg" Whitman must have thought so too as eBay was one of the original investors in TradeOut - and has a seat on TradeOut's impressive board (which, since May, has also included GE Capital Services Chairman and CEO Denis Nayden).

GE Equity was also impressed with TradeOut. "We were looking to make an investment in a horizontally focused asset remarketing business over the Internet," explains GE Equity managing director John Malfettone. "We had evaluated a number of potential investment targets and settled on TradeOut because they had the best management team, a powerful board [including Benchmark Capital's Bill Gurley and David Beirne], strong financial backing, and good technology."

The deal - a strategic alliance between eight GE Capital businesses and TradeOut - made good business sense from an operational standpoint too. As GE Capital Services chairman and CEO Denis Nayden explains, "TradeOut offers GE businesses a quick and cost-effective channel for distribution of off-lease products and related services in several channels - from heavy construction equipment, leased by Commercial Equipment Finance, to cars and trucks, leased by Auto Financial Services, Fleet Services, and Penske."

GE customers and TradeOut benefit too. "Customers benefit from a richer and deeper range of products to choose from," says Nayden, "and TradeOut gets a steady stream of high-quality GE assets which command a premium with their customers. So we all get something out of the relationship. Add to this our equity investment and GE gets the added bonus of sharing in TradeOut's ultimate business success."

GE Capital and TradeOut: A Strategic Alliance

TradeOut screen shot.

Two-year-old TradeOut - one of Forbes.com's Top Ten "Best of the Web" Internet sites for B2B commerce - is equally excited about working with GE Capital.

"The relationship between TradeOut and GE Capital is very positive," states Chris Hackett, TradeOut's vice president for National Accounts, including GE Capital. "Very early on, the GE folks took some time to educate us about GE processes, such as Six Sigma. I think that that helped to set our level of expectations and to just understand about the GE culture."

Teamwork has also played a large role in the joint venture's success. "Everybody really worked together to make this the success it is," Hackett says. "It wasn't that the TradeOut guys were so outstanding, or that the GE guys were so outstanding. It was the teams focussing on what needed to get done and everybody working together."

What got done specifically was that TradeOut immediately put new structures in place - including a new vertical dedicated solely to Commercial Transportation - to help promote and sell a broad range of GE Capital businesses' off-lease, idle, and excess assets online. And in return, several GE Capital businesses - led by GECCF and Penske Truck Leasing - agreed to try out the service. The results were beyond everyone's expectations.

Anybody Want a Used Shipping Container?

"TradeOut Sells Assets Online Valued in Excess of $1 Million for GE Capital" reads the headline of a recent TradeOut press release. Depending on your point of view, that could seem like a lot or a little money. But when you consider that the used assets in question were 20- and 40-foot shipping containers, and that GE Capital Container Finance had never sold used shipping containers online before the deal with TradeOut, that figure is extraordinary.

Indeed, since the GECCF shipping container online auction back in May - the first significant transaction GE Capital executed with TradeOut - GECCF has sold "more than $3 million of assets, some 3200 pieces of equipment" via TradeOut, states Jim Kachidurian, GECCF's director of remarketing, exceeding expectations. And GECCF and TradeOut have continued their relationship, with TradeOut bringing GECCF "experienced industry salespeople to further build and broaden our customer base."

Adds GECCF president Bob Forth, "This was a great example of marrying qualified buyers and sellers online. And we believe TradeOut is the ideal channel to fuel our growing e-commerce business."

TradeOut couldn't agree more. As TradeOut's Hackett points out, before the GECCF relationship "we did not have a commercial transportation vertical." Now, with GECCF's help, TradeOut has a successful new marketplace for selling used shipping containers and other commercial equipment - and GECCF quickly got a strong Internet presence. "It was definitely a win-win situation for both parties."

The Power of a Brand Name

A Penske advertisement for its used trucks on TradeOut.

Reading, Pennsylvania-based Penske Truck Leasing is also bullish on TradeOut. A joint venture between Penske Corporation and GE Capital, with annual revenues of approximately U.S. $2.7 billion, Penske Truck Leasing is one of the largest providers of transportation services in North America. Yet every year, in the fall (after the heavy moving season), Penske Truck Leasing faced the same dilemma: where to find buyers for its used trucks. This year, however, Penske tried something new: selling its used trucks online.

Working closely with Penske Truck Leasing's e-commerce group, TradeOut came up with the idea of an online "Special Event" sale to sell Penske's excess inventory. Not terribly optimistic after two previous truck auctions (on other Web sites) had sold four and twelve trucks, respectively, Penske listed over 2000 trucks on the TradeOut Web site and took a wait-and-see approach. The results surprised everyone.

The Penske truck auction, which took place August 23-31, and was billed as the largest online used truck event, sold more than 300 light and medium-duty vehicles - valued at $3.9 million - to buyers nationwide during the nine-day promotion. And 238 more trucks, worth $2.4 million, were sold after the promotion thanks to ongoing market activity.

"The sale exceeded our expectations," says Tom Janowicz, general manager of E-Lease at Penske Truck Leasing's Rental Solutions. "We were hoping to sell maybe 200 to 250 trucks - and we thought that might have been a stretch. But we sold 310 and are very pleased. Percentage-wise, we blew the numbers away."

Buyers were also pleased with the online auction as it provided them with earlier access to Penske's inventory, giving them almost a 90-day jump on the season as compared to the normal trade-in and redistribution cycle.

For its part, TradeOut attributes a large part of the auction's success to the power of the Penske brand. As TradeOut vice president of Commercial Transportation Henry Popplewell explains, "The combination of Penske's strong brand name and quality product coupled with TradeOut's marketing, sales, and technology expertise, enabled us to make this event a resounding success."

Indeed, the event was so successful that Penske plans on making the auction an annual event - and may even do another online sale this January.

Selling Assets Online: A Success Story

Before any online auction or sale, TradeOut does extensive market analysis and targeted mailings, faxing, and e-mailing - to expand their market reach and get the right kind of buyers, often interested parties who may not know certain assets are available or how to find them. Such was the case with the Penske Special Event.

To promote the truck auction, TradeOut sent out a few thousand mailers advertising the event. One of these flyers went to Louis V. Lepak Trucking Co. in Oklahoma City, where it immediately caught the eye of company vice president Jeff Lepak. For several years, Lepak had been looking to purchase a fleet of trucks with the same specs - at a reasonable price. He had never purchased a truck online before, but on the strength of the Penske brand he decided to log on and check out the auction. A few clicks later, Lepak was the proud owner of 40 trucks.

But that's not the end of the story. After the sale was over, Lepak calls up and purchases 20 more trucks. That's 60 trucks, all bought on the strength of the Penske brand and one well-targeted 78-cent mailer from TradeOut.

When asked about his Web purchase, Lepak spoke of how user-friendly and simple it was to navigate the TradeOut site and finalize his first online truck purchase. And when asked if he would use TradeOut again Lepak responded "in a heartbeat."

A Hot TIP

A TIP advertisement for its used trailers on TradeOut.

Over two months after the Penske Special Event, the truck auction continues to have far-reaching effects. The sale got front-page billing in Transport Topics, a popular industry trade magazine with people in the trucking business - generating additional sales and interest in the service. And it caught the attention of another GE Capital business, Transport International Pool.

"As soon as we did our sale, I got a call from TIP," says Penske's Janowicz. "They wanted to learn how to do it, what was successful, and would we do it again. And now they have their own online auction going on through October 27."

According to TradeOut's Hackett, 1,000 trailers were sold during the event, making it the most successful thus far. And inquiries continue to pour in.

TradeOut: A New Opportunity

For businesses hesistant to sell their used, off-lease, or idle assets via TradeOut, GE Equity vice president Patrick Kocsi understands their concern. "If you have a healthy skepticism of being able to sell some of your used equipment over the Internet, then you should take heart in the fact that a lot of the GE Capital businesses when they did this deal had the same healthy skepticism," says Kocsi.

"TIP wondered whether selling trailers over the Internet was going to work - and lo and behold, they've now sold a number of trailers on TradeOut. Nobody really had any idea that selling a truck, which you know is a fairly expensive asset as even a used truck goes for $15,000 to $30,000, would be something that could be easily sold over the Internet. Yet we're starting to prove the concept that even pieces of equipment that you might think have a limited audience - or pieces of equipment that you think that someone would only buy if they could actually "kick the tires" - can find a buyer over the Internet. That's what TradeOut is starting to prove."

Put simply, "TradeOut is an opportunity - at a fairly low cost - to find an audience of buyers that you've never had before," says Kocsi. "We [i.e., the various GE Capital businesses partnering with TradeOut] don't have the time or the money or the desire to go and seek out every possible buyer for any particular asset." TradeOut does.

Indeed, with its aggressive customized marketing, experienced industry-specific sales force, value-added services (such as financing and logistics), and buyer validation, TradeOut is providing GE Capital businesses with a powerful new distribution channel - and a good return on their investment.

For more information about TradeOut, you can visit their Web site, www.tradeout.com, or contact Chris Hackett directly at 914-239-2702 or chackett@tradeout.com.