GSI Commerce (NASDAQ: GSIC) is buying another competitor. Innotrac (NASDAQ: INOC) will bring GSI 30 new clients and additional capacity for outsourced fulfillment and call center services. GSI is paying $52 million for the deal, after which it will boast nearly 5 million square feet of warehouse space and more than 2,000 seats in its call centers. In a similar deal, GSI acquired Accretive Commerce last year.
Mercado Software may be hanging by a thread. Reports from two separate sources today indicate that the company has run out of cash, and dismissed much of its staff — paring down to a skeleton crew to support existing clients. Mercardo president, Corey Leibow, denied the report, but only before hanging up the phone with a terse response, “It’s not true. That’s all I can say right now. Bye.”
The news gives further support to our assessment that a shakeout of the ecommerce platform market is now underway. In August, MICROS (NASDAQ: MCRS) acquired Fry Inc. for a mere $31 million. In this case, the acquirer had complementary software that won’t displace Fry technology. But according to credible sources, two more hosted platform providers have been out soliciting offers to be rescued… ahem, I mean purchased. Clients of these companies may not fare as well.
Economic conditions have made it much harder for businesses to borrow cash and raise capital. The problem is particularly acute in the crowded ecommerce platform space. Time is running out for vendors to become self-sustaining. Without new sources of financing or investment, old fashioned profits are needed to fuel the business. Without profits, hope is waning. B2C Partners predicts this situation will become more prevalent in the months ahead.
What does this mean for merchants shopping for a new platform? Buyer beware. New clients must evaluate the viability of prospective vendors far more carefully. Failing to do so puts the investment at risk — especially if the vendor is already on the ropes and a suitor arrives to end support for your platform.
Want to learn more? Please join Bill Mirabito of B2C Partners on Thursday, October 30, 2008 at 2:00 PM Eastern for a webinar on “Choosing the Right Ecommerce Platform in a Tough Economy.”