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Flagg buys majority of SmartEtailing

Published May 3, 2012

BLOOMINGTON, MN (BRAIN) Thursday May 3 2012 12:18 PM MT—Steve Flagg and Mary Henrickson have acquired a majority stake in SmartEtailing, developer of websites and software for more than 1,000 U.S. specialty bike dealers. SmartEtailing co-founders Mark Graff and Barry Brenner said the investment will provide the financial backing to develop tools to help IBDs better compete with online sales.

All three parties emphasized that it’s a personal investment on behalf of Steve Flagg and his wife, not Quality Bicycle Products, which they own, and that it won’t change how SmartEtailing operates. The companies will remain separate. And while Flagg will have a majority financial stake, he will not have an operational role with SmartEtailing.

As such, QBP will not have access to any information on the business dealings of vendors such as Trek, Specialized, Giant and BTI among hundreds of others who currently work with SmartEtailing, Graff said.

“We made it very clear from the beginning that the only way we would be interested in exploring this is if we remain open to working with any supplier and every supplier can count on their information being kept in confidence as we have done since the beginning,” he added.

SmartEtailing will continue to operate from offices in Colorado and California and Brenner and Graff will continue to oversee it as co-presidents and have a minority ownership. But the investment will allow them to hire more employees. SmartEtailing currently has 37 employees, but Graff said they intend to staff up “in a big way” over the next month, adding client services reps and development engineers.

The industry has lagged behind in creating ways for specialty retailers to better compete with online giants like Amazon that offer convenience and selection at lower prices. But SmartEtailing’s Brenner and Graff and QBP’s Flagg contend that specialty retailers can better compete if suppliers make their inventory visible through retailers’ websites, institute a MAP policy and offer a buy-local-now option to dealers.

“A recently announced initiative, Buy Local Now, is going to be a game-changer,” they noted in a letter to the industry. “It will drive online consumers to local retailers and every specialty retailer can participate, whether using a SmartEtailing website or not. Developing this technology in a timely fashion, however, will outstrip SmartEtailing’s resources,” Graff and Brenner said, pointing to the need for outside investment.

The financial backing will also allow Graff and Brenner to expand the buy-local-now program to other specialty channels threatened by Internet sales including snow sports and outdoor.

In an email announcing the move to QBP employees, Flagg said the investment will have no impact on the distributor’s profitability.

“In the long run, I believe this will strengthen the bike industry and QBP will benefit from a stronger SmartEtailing, as will everyone,” he wrote.

Topics associated with this article: Mergers/Acquisitions

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