Former Tech Data Exec Finds New Life In Used Equipment Market

Manufacturers traditionally don’t think much of the secondary market because they don’t see any revenue, but Serra thinks his experience can help bridge the gap. A lot of what he learned as a distribution executive can apply to the used equipment market--even the relationships with vendors and solution providers.

“It’s like any other channel, where we learn to co-exist with each other. Most manufacturers understand we’re an integral part of the life-cycle management of their products, but we know we’re not going to be invited to any partner conferences,” Serra said.

Serra said Network Liquidators reminds him of Tech Data 18 years ago. “At the time, the market didn’t necessarily understand what role the distributors played or whether or not partnering with them would represent a good thing or a bad thing. What made a difference were the people, passion and accountability that went into building a value proposition that rewarded the partners that chose to participate,” Serra said.

“I see those same traits here at Network Liquidators,” he said. “And as the secondary market continues to evolve, I believe the same rewards are in store for those who chose to participate.”

Network Liquidators specializes in used networking equipment, offering one-year warranties on products from Cisco Systems, Extreme Networks, F5 and Juniper Networks. The Tampa, Fla.-based company expects $30 million in revenue this year and keeps about $50 million in inventory.

The used networking equipment space is a $1 billion market this year, and Network Liquidators counts many Fortune 100 companies as customers, said John Stafford, Network Liquidators president and COO.

“There are such massive upgrades in equipment that the greatest thing last year is completely available as used this year,” he said. “We have stuff in the warehouse that’s only been out six months. We have stuff that’s been out seven or eight years.”

Network Liquidators attempts to find a seller for used products before it buys them, which protects the company from holding inventory that nobody wants, according to Stafford.

“Everything we purchase goes through a grueling test. It has to be in good physical shape and in working condition with valid serial numbers. It has to be sellable. We are not in the fixing business,” he said, adding that the company’s return rate is less than 1 percent. Some solution providers have found a successful business model with Network Liquidators. D&D Consulting, Albany, N.Y., has partnered with Network Liquidators several times over the past six months to remove old equipment from customers’ facilities.

“We don’t buy from them, but we use them as an alternative to vendor trade-in programs. We get far more value there than we get from vendors,” said Christopher Labatt-Simon, president and CEO of D&D Consulting. “It gives our customers more purchasing power. They can turn equipment into cash that they can then use to purchase new equipment from us. It’s helped us turn what may be stagnant accounts into profitable accounts.”

Network Liquidators buys Cisco equpment for “pennies on the dollar” and Extreme equipment for about 7 percent to 10 percent of its original cost, but it’s better than nothing, Labatt-Simon said. “The alternative was to pay a disposal services company to cart the stuff away. We don’t just dispose it but generate cash for it,” he said.

Fortune 500 customers spend up to 20 percent of their IT budgets on used and refurbished equipment, Serra said. In most cases, it helps end users meet IT needs without blowing their budget, he said.

“You’re not building out an entire network with used equipment, but you’re filling gaps in your networking needs. I don’t believe [end users] get that much push back [from vendors]. If they were spending their entire budget, I think there would be some concern,” Serra said.

“The manufacturer realizes the value in what we do because we protect the brand,” he added. “In many cases, the end user purchases equipment that can be viewed as a placeholder for their brand. As end users grow, their requirements for new technology grow, and we’ve embedded a brand within that end user for future sales.”

So what do Serra’s former vendor friends think of his new job? He said he talked to several vendor executives about Network Liquidators and that those conversations led him to taking the job. “I may not get invited to partner conferences, but I still get invited to birthday parties,” Serra said.