Page 199 - DMGT554_RETAIL_BUYING

Retail Buying

Notes E-commerce Assets: The e-commerce Assets consisted of the core website and the Service
Merchandise dot-com domain names. The value attributes were the technology, the website
content and the goodwill associated with it. The technology being used was outdated at
the time, but still functional. However, there would have been minimal interest in the
technology alone. The website was generating sales well into the eight figures and was an
attractive asset with an estimated value of between $150,000 and $400,000. The e-commerce
assets and website were sold in their entirety including the Service Merchandise dot-com
name.

Database and Customer Lists: The Service Merchandise database was composed of
approximately 12.5 million names compiled from customer lists and customer contacts
over the prior three years. The lists were extremely well managed, clean and usable by a
wide variety of retailers. In addition, extensive product purchase history was available
with the database, which qualified the asset as one of the higher quality customer lists
available at that time in the marketplace.
The value of any customer database or customer list is, of course, directly correlated to the
age of the customer data. Therefore, the most current customer data commands a price
nearing the upper end of the valuation range. As a result, the team recommended the
outright sale of the database should be conducted as quickly as possible. To maximize
value, the customer lists were made available for one-time rentals in the immediate near
term to take advantage of high volume sales events at that time. In addition, the greatest
value was realized in an outright sale of the customer database to other retailers. The
estimated value of the customer database was approximately 10per name for a total of
roughly $1.25 million. However, ultimate value depended on a thorough analysis of the
aging of the database.
Farberware License: In an unusual twist, it was discovered that Service Merchandise had an
apparently transferable license from Farberware (the cookware and kitchen accessories
company). If the license was indeed transferable and saleable, value was estimated between
$550,000 and $850,000. The license also included rights to certain other names, including
Salton and Windermere. It must be remembered, and has been discussed earlier in this
handbook at length, that the transferability/sale of licenses is problematic at best in a
bankruptcy or reorganization. In the final analysis, however, the Farberware license was
ruled not transferable and, therefore, no value was realized and the license reverted to
Farberware.
1-800 Jewelry Assets: This bundle of assets was unique in that it cut across several intangible
asset types or classes including trademarks, domain names and communication assets
such as telephone numbers. Service Merchandise traditionally had a very strong position
in jewelry sales and was probably the number one online jewelry sales outlet. In addition
to being one of the dominant national players in jewelry retailing, they engaged in online
support for their jewelry operations. As a result of management’s emphasis on jewelry,
the company had assembled a bundle of assets related to its 1-800 Jewelry business and
these had a great appeal to regional and national jewelry retailers. The assets were as
follows:

 Two federal trademarks for 1-800 Jewelry;
 10 domain names for 1-800 Jewelry and related domains;
 More than 20 other domain names registered for Jewelry Expert, Jewelry Authority,
etc.;
 The rights to the 1-800 telephone numbers; and
 The rights to the customer list of jewelry purchasers.
Contd...

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