Monday, September 27, 2010

An Award & Bigfoot Lives

In the special Technology section of this morning’s Wall Street Journal ,The Receivables Exchange is named winner of the Journal’s 2010 Technology Innovation Award in the category of e-Commerce.

This is a well-deserved recognition of the TRE Platform, which is made even more impressive by the fact that there has not been a winner in this category since 2004.

Considering the e-commerce innovations that have come to market since 2004, that have NOT been considered worthy of an award, this is quite a compliment to the Exchange’s management and technology teams.

It’s one thing to have an important and innovative idea. It’s quite another to be able to actually make it work.

TRE has been able to do that both in terms of the basic concept of providing a liquid market for the receivables of small-mid-sized businesses and in terms of doing it in a real-time online environment that is so integrated from Seller through Exchange to Buyer, and back, that money flows, fully accounted-for, on the basis of a one-day turn-around.

A brilliant concept is of little value unless it can be made to work.

TRE makes it work and it’s making it work better all the time. Updates and upgrades to the platform are made on an essentially continuous basis. As the volume of TRE transactions continues to grow, significant additional platform development will be necessary. But history to-date provides a convincing case that the management of the Exchange and its tech people will more than keep up with the demand.

Another day of congratulations to TRE!

On another subject: to update my last post on the “reverse lurch” -- the shift of pricing power to the Sellers has continued throughout the month of September.

Bigfoot continues to make his presence felt as more and more auctions are closed by a leap to the buy-out pricing parameters. It’s difficult to tell if this is one new Buyer or a Buyer with a significant increase in allocated funds. But the tracks that Bigfoot leaves are pretty easy to follow.

When a price-insensitive Buyer is in action, fewer auctions are left for the rest of the players. That increases competition and depresses returns on the deals that Bigfoot does not buy.

To the extent that the new money is acting on the basis of lower cost, and the volume of auctions does not appreciably rise, pricing will likely remain at the lower levels. But, to the extent that some part of Bigfoot’s behavior might be modified over time as pricing lessons are learned, or the volume of product available increases sufficiently to offset his demand, pricing might well take another swing back toward the Buy-side.

That’s happened in several cycles over the relatively short life of the Exchange and I suspect it will happen again.

Ultimately, more liquidity will draw more product to the market just as more product (that the Buyers find attractive) ultimately draws more liquidity. This sort of cyclical pattern of pricing should be expected in a developing market.

Patience is a virtue, they say.

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