These days, clicks-and-mortar post-mortems are more widely read than Harry Potter novels. Supply chain management stalwarts such as Wal-Mart are still struggling to reinvent themselves as online frontrunners. And courteous in-store managers have given way to indecipherable online FAQ postings. From unique equity arrangements to customized Web sites, these strategies serve as valuable lessons to those looking to grab a slice of today's trillion-dollar B2B e-commerce pie.
Take Sears, Roebuck and Co., for example. In February 2000, the legendary U.S. retailer inked a deal with Carrefour of France and The Oracle Corp. to create a global online marketplace for the retail industry. Dubbed GlobalNetXchange (GNX), the joint venture enables members to buy, sell, trade or auction all types of retail merchandise over the Internet using standard Web browsers. By electronically linking trading partners, GNX promises to trim retailers' purchasing costs, increase collaboration and enhance supply chain efficiencies. In fact, Sears currently spends roughly $100 an hour on electronic data interchange. Using the Internet could reduce that figure to $1 per hour.
Such grandiose mission statements can be found on the home pages of many of today's highly publicized B2B marketplaces. The difference, however, is that GNX is already up and running. Since its February launch, this global exchange has added a string of new partners including German retailer METRO AG, British retail conglomerate J Sainsbury and Australian retailer Coles Myer. Together, GNX retailers account for approximately $200 billion in purchases from more than 70,000 suppliers, partners and distributors around the world. To date, the company has hosted more than 30 auctions and boasts nearly $100 million in purchase volume. And Fortune Magazine recently ranked GNX one of the premier retail B2B companies.
But ensuring instant operability is not the only lesson companies could stand to learn from GNX. According to Larry Costello, senior manager of communications for Sears and GNX, the equal representation of participants can mean the difference between provoking competitors and luring partners.
"When we initially launched GlobalNetXchange, there was some concern about the [company's] equity set-up and that was being misinterpreted by some of the retailers out there that were considering joining exchanges," says Costello.
It's easy to see why. Originally, Sears and Carrefour shared the majority interest in GNX. A distribution of power that repelled potential participants, the company soon tweaked its partnership structure to ensure that equity is based solely on the amount of volume that a retailer commits to the exchange.
Still, the prospect of relinquishing purchasing power to a collective of archrivals is a bitter pill for many companies toswallow.
Explains Laurie Orlov, an analyst with Forrester Research in Cambridge, Mass.: "Whenever competitors get together to make decisions about anything ... the decision-making process, who's in charge and who's internal business process is used as the ideal model all become issues."
But as automotive, aerospace and agriculture companies scurry to form alliances, industry experts say that it's retailers that could stand to lose the most by participating in exchanges. After all, a seamless procurement strategy is precisely what can separate a multibillion-dollar retailer from a struggling mom-and-pop shop. It's no wonder then that retail behemoth Wal-Mart declined to be interviewed for this article and Walgreens, J.C. Penney and K-Mart all failed to return calls.
Enter MarketMAX Inc. A Massachusetts-based provider of management software and decision support tools, the company recently unveiled Market4Retail.com, a B2B electronic marketplace for retailers. This application not only integrates retailers' and suppliers' planning and operational systems but enables them to work collaboratively on all aspects of merchandising and procurement decisions. But while MarketMAX's enterprise system has lured retailers including Williams-Sonoma, Circuit City and American Greetings, it's the company's decision to focus on the development of private networks that is breaking new ground.