FedEx Corp., a major shipping carrier for wholesalers, retailers and other businesses, is about to appear a lot more like a lot of its customers.
FedEx announced this week that it had agreed to acquire Genco, a shipping services provider specializing in handling the “reverse logistics” of receiving from retailers excess merchandise returned from customers or goods the merchants couldn’t sell in the first place.
For FedEx, getting a boost of expertise and technology in reverse logistics will help it better serve a growing market for handling excess goods that retailers and other companies need to quickly unload to make room for new merchandise, experts say. “It’s a growth opportunity,” says Kevin Sterling, a financial analyst who follows FedEx and other transportation companies at BB&T Capital Markets.
FedEx did not say what it is paying for Genco, though Sterling estimates the purchase price at about $2 billion or more. Bloomberg News also reported earlier this week that FedEx was expected to pay about $2 billion, based on an estimate from SJ Consulting Group Inc.
But the logistics of transporting and receiving that merchandise is only half of Genco’s business model. The crucial other half, Genco’s executives and industry analysts say, is the company’s ability to sell those overstock goods online. Genco does that through Genco Marketplace, which sells wholesale online at GencoMarketplace.com, and through the consumer-oriented retail site NoBetterDeal.com.
“That’s what makes the supply chain more efficient—to have the liquidation integrated into the reverse logistics,” says Ryan Kelly, Genco’s senior vice president of strategy and marketing. “It’s one of the ways we stay ahead of the game.”
With those operations under the wing of FedEx—the acquisition is expected to close sometime next year—FedEx will emerge as a wholesaler and retailer of overstock general merchandise as well as a shipping carrier and provider of logistics management services for other wholesalers and retailers of excess goods. FedEx would then own an operation that competes with a company like Overstock.com Inc., which, like Genco Marketplace, specializes in selling excess merchandise to businesses as well as consumers. Overstock is No. 31 in the Internet Retailer 2014 Top 500 Guide, which ranks companies by their annual web sales. Overstock declined to comment.
“The acquisition of Genco will transform our global portfolio through the addition of new best-in-class supply chain management services,” says Frederick W. Smith, chairman and CEO of FedEx. “As e-commerce continues to grow, customers of both companies will reap the benefits from the broadened capabilities and powerful new services.”
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