Retail Lessons

While many retailers have failed in their dot-com endeavours, others are single-handedly pushing the envelope of online procurement


In June 2000, MarketMAX penned an agreement with Amazon.com to create a network that will link the lone retailer with a host of suppliers. Unlike the Big Three automakers' proposed exchange, the project promises to improve Amazon.com's procurement strategies and supplier relations without requiring self-exposure to key competitors, or worse, eliciting the attention of antitrust authorities such as The Federal Trade Commission.

Warns Donald Peck, chief financial officer of MarketMAX: "The model of three automakers all going on to the same exchange -- it may be flawed. I think they're going to be loath to put the resources and the real commitment behind it because they're afraid that they're going to lose competitive advantage to the other."

Not one to be outdone by its competitors, giant apparel retailer Lands' End has also spearheaded a host of strategies that B2B enthusiasts would be wise to examine. The Wisconsin-based company has collaborated with Commerce One and Ariba in order to supply corporate buyers with customized Lands' End merchandise. Rather than flip through countless glossy catalogs, buyers can now gain access to Lands' End corporate products through a global trading portal.

Conscious of the fact that not all buyers can afford to implement sophisticated purchasing procurement software, Lands' End has also developed a less expensive sales channel that caters to today's small and mid-sized companies. Dubbed Online Custom Stores, these customized Web sites enable a company's employees to purchase pre-approved Lands' End merchandise online, within set budgetary limits. Clients currently include Saturn, Bell South and Radio Shack.

Says Mike Grasee, director of e-commerce for Lands' End corporate sales division: "Some of the Fortune 1000 companies are willing to [invest in expensive procurement systems] because of their size and scale ... Other companies are also looking for the same efficiencies of the Web but for them, it's not cost-effective to implement something that sophisticated."

Fulfilling the needs of both multibillion-dollar corporations and mid-sized retailers is a costly and time-consuming proposition, but it's well worth the effort. According to Grasee, the company's corporate sales amounted to $140 million in 1999, 10 percent of Lands' End's overall revenues.

As for Lands' End's own team of nearly 10,000 employees, the company has recently implemented a platform that enables employees to purchase office supplies online. And the development of an online paper procurement process is currently in the works. But satisfying the varying demands of its clients is of utmost importance to Lands' End, a company whose offline procurement processes are as legendary as they are top secret.

"Connecting to Ariba and CommerceOne is what our customers want, but we also know that six to 12 months from now, they are going to want us to be in different places as well," says Grasee. "So we've really tried to architect our whole e-commerce initiatives to make sure that we're very nimble and responsive to our customers' needs."

All of which highlights the retail industry's compelling advantage over manufacturing and industrial companies interested in creating e-commerce exchanges. Having served decades on the frontlines of exorbitant marketing campaigns, fly-by-night fashion trends and endless focus groups, retailers not only know their customers, but they know what is required of their suppliers to meet consumer demands.

Says Kurt Barnard, president of Barnard's Retail Trend Report, a firm that forecasts retail industry and consumer spending trends: "The retail industry is in a very unique position. It deals with you and me -- customers. And we are far more in contact and in touch with what the market wants, needs, can absorb or would reject ... than those companies that do not deal directly with the consumer."

That's not to suggest, however, that retailers don't have their own growing pains to endure. Convincing companies-buyers and suppliers alike-to invest in an exorbitant global exchange calls for a compelling equity arrangement, not unlike that of GNX. And ensuring that an online hub boasts enough products to buy and sell is yet another challenge facing today's B2B retail marketplaces. Issues of power balance and liquidity aside, the retail sector has nevertheless managed to find innovative ways to create trust and forge common business objectives with suppliers. The equal representation of participating companies, the development of private networks, customized Web sites, working with suppliers to anticipate consumer demands-they are all strategies that non-retail B2B marketplace participants should heed.

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