Connect Distribution of Birmingham has acquired the eSpares online spares business for an undisclosed sum but, in the process, has tripped the interest of the Office of Fair Trading (OFT) for a possible problem under the Enterprise Act.
Stock Market Wire reported on Monday that the OFT is considering whether arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation under the Enterprise Act 2002.
Should it be found to be a relevant merger situation, the OFT will further consider whether the creation of that situation may be expected to result in a substantial lessening of competition for goods or services that warrants reference to the Competition Commission for investigation and report.
Whilst details are sparse at present and, when contacted on the matter Connect declined to comment on any questions, we are led to believe from sources close to the matter that Connect paid in the region of £4-5 million for the eSpares business. This has some with knowledge of the industry somewhat confused as eSpares as a business has never actually made a profit and this seems a large sum of money to pay for little more than a website.
Sources close to the matter revealed that £1.2 million in cash was paid with a further £3 million or so to follow for all stock and assets of eSpares as well as a write off of debts to Connect Distribution. Further comments indicated that all eSpares staff were to be made redundant shortly and all call handling as well as distribution to be moved to Connect’s premises in Birmingham, the saving in salaries rumoured to be in the region of £3 million per annum.
Sources also have implied that something out of the ordinary had taken place in respect to nominated directors stating that a relative of a director had been appointed as a company director, the inference being that this was to make the company look more independent on paper.
Of course with no comment from Connect Distribution we cannot attest to the accuracy of comments made by third parties.
Wider Implications
It is true that Connect run many, many sites for other busiensses, effectively allowing an online (or offline retailer with a web presence) to sell from a huge catalogue of spares and accessories without have to have much to do with the actual sale, shipping or responsibility as a retailer as the customer is not actually buying from who they think that they are. Connect runs spares websites for the likes of B&Q, Washerhelp, most any spares website you see that starts with “4” and a host of other sites from manufacturers spares sites to sites for independent traders. There are seemingly hundreds of rebranded sites operated by the one company.
However looking at this acquisition objectively it may actually hold wider implications than those that may be immediately apparent for online spares businesses.
There is a suspicion that the OFT’s interest may partially be in the fact that with this acquistion that Connect could hold a dominant market position in relation to appliance spares and that this could place the company also under further scrutiny but also that this may serve as a warning shot to other online retailers that operate multiple websites including the likes of DRL who operate many appliance sales websites on behalf of other retail brands.
Is this the start of the OFT looking into such capers online?
We don’t know but we do know that there are a lot of people out there that think they bought goods from a retailer, even many a big high street name, only to find out that in fact they didn’t, they bought it from a “partner”.
OFT Submission Details
The OFT, as mentinos have request an informal submission over the acquisition and the details of that request and where to send any comments are as follows:
Completed acquisition by Connect Distribution Services Ltd of e-Spares Ltd – issued 1 August 2011
Please send written representations about any competition or public interest issues to:
Emma Verghese emma.verghese@oft.gsi.gov.uk
Fax: 020 7211 8916
Any comments that you may have in relation to the matter must be submitted by 15 August 2011.
‘people out there think they bought goods from a retailer, even many a big high street name, only to find out that in fact they didn’t, they bought it from a “partner”‘is there anything wrong with this? connect run sites such as diy-spares with full co-operation of the companies they run them for (in this case b&q). b&q are a household name – why would they do anything to damage their brand? they work in full co-operation with connect in regard to the diy-spares site. it would be a different matter if connect had not asked b&q’s permission to use their brand, but that is simply not the case.think of it like this: if you buy tesco car insurance, you are not buying policies put together by tesco themselves – they have a third party underwriting. however tesco have put their faith in that company. in turn if you trust tesco, you can buy their car insurance, and it will serve its purpose perfectly well.there is nothing sinister going on in this regard.
If people find that nothing underhand is happening at Connect with the acquisition of the online business eSpares, then why has Connects Sales Director, and son of the Chairman, Martin Depper quit his role as Sales Director of Connect and taken a Directorship role now at espares, but all seemingly still being done from his office at Connect, strange. Now this is not rumour, we see him daily. Now they have espares, how about a wage rise from the meesly £7.20 paid hourly to the trade sales staff
In contact that I have had with CDSL the comment below would appear to be untrue and misleading. Which, in all honesty, fits with information that we had previously that Martin Depper is and has been working from the eSpares offices in London for a couple of weeks now.
I have heard that connect distribution has now acquired the espares online brand and will follow this story with interest. Will it be good or bad for us independent online retailers? only time will tell, but in my opinion i dont think it will harm any of us to much.
Connect does not look after it’s trade customers like it used to.first getting rid of paul on the trade counter.who was always helpful to his customers. Then we have the small heath workers who state that someone will phone us back.but no call backs.not always the fault of the person taking the call.but when you never hear off your trade representative.I then start buying off other suppliers. TRADE CUSTOMERS ARE CHARGED 50% RESTOCKING FEE.WHILE RETAIL CUSTOMERS GET A FULL REFUND. SAD TO SEE US SMALL FRY NOT BEING TREATED WITH RESPECT AND DIGNITY.
Electrue, HRS and Willow Vale all there to assist the small retailer both as a spares supplier or a finished goods retailer. THEN change the name to Connect and start to obliterate the small dealers. Yes OFT go for it – It is long overdue
This so called merger/buy out will corner the market somewhat. Connect are charging excessive prices on parts making ridiculous profit margins both trade & public. Mark my words this will be bad for everyone concerned with spare parts for appliances!!!!
I struggle to see why people would be alarmed at this, Connect Distribution has never been different. It has increasingly competed at every level with it’s core, “trade” customers. Their ambition has long been to find ways to bypass those original customers and sell directly to end users by any medium they can. That is their right and a darn good job they have done too. From what detail we have it sounds as though Espares was on it’s way to S*** Creek anyways and as always the eagle eyes at Connect got in first and bought the “site” to prevent the loss they feared may be coming. Young Mr Depper is a driven and talented individual, I see profits on the horizon at Espares. I think that he may also be doing a bit of sales directing at Connect too, in his spare time, as a favour like, once the motor racing season is over and he has got his weekends free.
I’ve no doubt Mr Depper is talented but I fail to see how that has any bearing on the issue. Nor do I see any relevance in his racing car career either.What is relevant to the OFT seems to be that Connect may have what is considered to be a “dominant” market position that could stifle competition and present barriers to entry.Had eSpares failed (likely if nobody bought it) the business would simply have gone elsewhere and Connect, with their various retail sites, would have had the same chance as anyone else.
Same chance as everyone else, hmmm. Most independent retailers that have a web site, have exactly that, A(1) website, Connect have a huge number of sites, they have a bigger chance than anyone of securing that online order already and it would seem they were already supplying Espares. My crystal ball says that the warehouse and its staff will close and Espares will have a deal with Connect to do the mailing for them. Apart from the effect on the Connect bottom line, whats the diff? You would have to try quite hard to buy spares on the internet without it originating in Brum, the OFT are about to arrive at the stable in time to see a horses a**e bolting into the distance.The comments about M.D and racing, sarcasm, the intonation doesn’t come across well in type.
Of course it is potentially sinister! – With a market dominance, you can charge what you like for spares. This laready happening for necessary spares that increase the appliance running costs, e.g. Samsung Water Filters for fridges at £39.99 when you can get perfectly good replacements for half the price. Samsung are not helping either my making small unnecessary changes to deisgn and serial numbers in an attempt to confuse consumers, along with third-party spares invalidating warranty. This is a scam that needs looking into by the OFT, and I for one am going to raise it with them – The more that others do, the more likely we’ll be reasonably charged for spares in the future.
…That’s probably a lot to do with the reason they bought eSpares who were apparently not making much profit. They also own Partmaster, 4OurHouse, 4MySamsung (offical Samsung spares distributor), RepairCare, and many more.This monopoly and buying up competitors is an unfair situation and anti-competitive, and their prices for necessary scheduled parts (like water filters) are proof.