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What it does
Liquidity Services is eBay
How it stacks up
A large part of Liquidity Services’ appeal is that nobody else is really doing what they’re doing. Their competitors are traditional liquidators and fixed-site auctioneers. Liquidity is really the first to bring this service into the Internet era. That said, it is interesting to compare how well the company operates compared to its online marketplace peers.
Company |
3-Year Revenue Growth |
|||
---|---|---|---|---|
Liquidity Services |
14.9% |
41.7% |
4.0% |
14.2% |
Copart |
12.1% |
47.3% |
19.6% |
15.5% |
eBay |
11.9% |
71.8% |
27.3% |
9.3% |
GSI Commerce |
19.0% |
59.6% |
-0.7% |
1.6% |
Overstock.com |
7.7% |
18.4% |
1.6% |
9.3% |
What to watch out for
Traditional business threats such as the possibility of new entrants or incumbent competitors encroaching on Liquidity Services’ government auctions and liquidation services turf aren’t really a problem -- as long as the company maintains its exclusive contracts with the Department of Defense. Therein lies the rub. By 2012, Liquidity’s two most important contracts, which accounted for 54% of total revenue last year, will expire. Being able to renew those contracts (and preferably with even more favorable terms) is absolutely crucial to the company’s future success.
Why you should care
It is always a little disconcerting when one organization (in this case the DoD) holds so much power over the operational results of a company. Liquidity Services realizes this and has actively tried to increase its non-DoD business segment by signing up more than 450 corporate clients and taking its expertise in handling large quantity sales into the private sector. The company’s stock has jumped about 30% since I first came across it late last year. If it can hold onto its existing market and continue to expand into new territory, it might be poised to do much more.