PetSmart acquired Pet360 for $130 million in cash and up to $30 million more in future performance-based payments.
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Getting there means the exchanges must support real-time collaboration. And several years may pass before the technology is mature enough. “We are not talking about providing swivel-chair electronic commerce, where the retailer communicates with a trading partner on one system and then moves to another system to communicate to the next partner,” Seuleski says. “A retailer selling jeans needs to be able to go online and communicate with all of its supply partners-from the product designer and manufacturer to the logistic providers-all within a single system.”
Most exchange platforms provide strong support for purchasing because e-procurement software suppliers pioneered trading exchange technology. That’s why companies like Ariba of Mountain View, Calif., and Commerce One, Pleasanton, Calif., are among the leading suppliers of trading exchange platforms. Enterprise systems supplier Oracle Corp., based in Redwood Shores, Calif., is an early leader in the race to provide technology for retail exchanges. The Oracle Exchange platform runs GlobalNetXchange and will power RetailersMarketXchange.com. The company owns a stake in both, and its Oracle Online business unit is an application service provider.
The Worldwide Retail Exchange, which aims to go live in the third quarter, has not yet chosen a technology partner. A spokesperson says the founding members have formed an executive committee to assemble a management team, which will then select a technology partner. RetailersMarketXchange.com also is assembling its management team for a summer launch.
As these alliances get started and grow, their staying power will come via fostering new strategic relationships among buyers and suppliers-and strengthening old ones. “Companies are not going to purchase all of their goods through auctions,” Laughlin contends. “There will always be a need to maintain long-term relationships with suppliers of certain goods.”
Sears, for instance, relies on a specific manufacturer to supply Kenmore washing machines. The retailer has no intention of dumping that relationship, buying washers through online auctions and slapping on the Kenmore logo, Laughlin explains. But Sears and the existing manufacturer could benefit by moving their dealings online. “We could use the exchange to provide them information on the demand for particular models,” he says. “They could give us current information on their inventory and production capacity. So, we’d know exactly when they can deliver our orders.”
Meanwhile, the immediate payoffs look good. Current exchange technology promises improvements to any process that “is paper intensive or labor intensive, in the sense of requiring a lot of faxing or telephoning,” says Seuleski. That’s good news to Bill Zumwalt, McLane’s president of information systems. “We still use a substantial amount of paper at the distribution end of the supply chain, even though we have been participating in programs like EDI for quite some time,” he says. “That means we still have a number of costly delays in our processes.”
McLane has other reasons for jumping into the retail exchange movement as it’s just beginning. One is the ability to display its catalog of services on the exchange, making it available to “a vast audience of potential customers.” Another reason is the ability to influence how exchanges ultimately evolve. “The industry is going to change as a result of these exchanges,” Zumwalt says. “We think we it owe it to our customers and business partners to be involved at an early stage, and perhaps do what we can to help determine how some of those changes unfold.”
Sidney Hill Jr. is a freelance writer based in Albuquerque, N.M.