CHAINS FORGE B2B NETWORK
Byline: David Moin
NEW YORK — Target, Kmart, Marks & Spencer and seven other major retailers operating food, drug and general merchandise stores in the U.S. and Europe announced Friday that they had formed a partnership to establish the WorldWide Retail Exchange. The new Web-based, business-to-business exchange is expected to begin operating in mid-2000. Designed to facilitate trading between retailers and more than 100,000 suppliers, partners and distributors, the exchange will compete with GlobalNetXchange, linking Sears Roebuck and Carrefour SA with software giant Oracle Corp. in the first worldwide online supply marketplace for retailers.
GlobalNetXchange, announced in February, is being designed to enable retailers and suppliers to make purchases, exchange information and forecast demand online and is expected to lead to significant cost savings in buying and sourcing. Sears said the venture could be spun off as an initial public offering, while Target Corp. officials said WorldWide Retail Exchange does not see an IPO in its future.
Both Sears and Target envision conducting all their sourcing and supplying on the B2B systems in the future, while Carrefour plans to move the majority of such transactions to the new network.
Such Web-based exchanges may replace EDI, but the Target spokeswoman said the company foresees EDI working in conjunction with Worldwide Retail Exchange.
The other retail partners in the U.S. are Albertson’s, CVS and Safeway; in France, Auchan and Casino; in the U.K., Tesco and Kingfisher, and in the Netherlands, Royal Ahold. Together, the group operates more than 30,000 stores and had 1999 combined sales of more than $300 billion. Cora, a leading chain in France and Belgian, plans to join the partnership in the near future.
The WorldWide Retail Exchange will be designed as an open information highway of publicly available data together with private price and promotion information between buyers and sellers. The exchange will also provide the means for auctioning products. Participating companies expect interaction on the WorldWide Retail Exchange to be more efficient due to standardized item information. The WorldWide Retail Exchange is expected to lower costs in the supply chain for all participants.
Initially, the founding members of WorldWide Retail Exchange will each hold 5 percent of the new company’s shares. The remaining equity will be reconsidered when it is known how many other retailers wish to join the exchange. Chief executives of the participating companies, or their representatives, will form the executive committee. In the future, the exchange is expected to be an independently managed company.
A technology provider has not been selected yet.
In the first few years, investment in the partnership is expected to amount to about $100 million, but retailers’ savings from using the exchange are expected to rapidly exceed costs, officials said.
“We see this as a neutral marketplace,” said the Target spokeswoman. “We are welcoming other retailers to join us. Our guiding principle is that we want to lower the costs of doing the business for all participants.
“Eventually, all of our procurements will be done over the Internet,”she added. “Our whole intention is to make the industry more efficient.”