CINCINNATI -- Kroger Co. here said last week it has reached a tentative agreement to become an equity partner in GlobalNetXchange, the retail industry's first global business-to-business on-line exchange.
Kroger, the first U.S. food retailer to participate, said it expects the exchange to help reduce its purchasing expenses and improve the efficiency of its supply chain. It also said the cost savings generated from Internet-based transactions will allow its purchasing and procurement staffs to shift their focus to product quality, supplier competitiveness and performance.
GNX was founded in late February by Sears, Roebuck and Co., Hoffman Estates, Ill., and Paris-based Carrefour, with Oracle Corp., Redwood Shores, Calif., providing software, implementation and support as a minority partner. The exchange added two more European partners late last month: Metro AG in Germany and J Sainsbury in the United Kingdom.
With last week's addition of Kroger, GNX said the equity partners account for approximately $175 billion in annual purchases. It also said other retailers will be invited to join the exchange.
Kroger said its participation is subject to completion of a definitive agreement among the parties.
Besides its participation in GNX, Kroger will also be one of six participants in the pilot phase of UCCnet, an on-line exchange developed by the Universal Code Council, which will be launched in May. By early July UCCnet will be opened up to the entire industry, a spokesman said.
Formation of another on-line industry exchange was announced last month when more than 50 major consumer product companies joined with the Grocery Manufacturers of America to create an electronic marketplace for suppliers only.
According to GNX, GlobalNetXchange will be open to all segments of the retail industry, including grocery, general merchandise, apparel and home improvement businesses and will allow one-to-one buyer-seller communication and interaction, as well as many-to-many communications.
Through the exchange, members will be able to buy, sell, trade or auction goods and services over the Internet using standard web browsers, with members and their suppliers able to capture savings through more strategic sourcing of "for resale" and "not for resale" goods and services.
GNX said the exchange will generate revenue through either transaction fees based on usage or memberships.
Carrefour conducted the first auction on the system March 13, and Sears held its first auction March 17.
According to a Sears news release, Carrefour accepted bids on various consumer electronic items, "and the results were deemed excellent by Carrefour management," the release said.
Sears said its first auction, involving not-for-resale products, had to be extended due to bidder interest and resulted in cost savings for the retailer and incremental business for the winning supplier.
Jonathan Ziegler, San Francisco-based managing director of Deutsche Banc Alex. Brown, New York, said GlobalNetXchange and other on-line marketplaces should ultimately increase liquidity in the marketplace by moving more product back and forth.
"This is the way companies will do business in the future," Ziegler said. "Many have been involved with the more structured environment of EDI (Electronic Data Interchange), but UCCnet and GNX represent a major expansion of communication among buyers and vendors.
"Each exchange assembles a group of retailers on the buy side, which will attract more vendors to get involved on the sell side -- and the more buyers and sellers you get, the more liquid the market becomes for product movement," Ziegler said
He said he foresees opportunities for similar bidding in a variety of settings. "Just as vendors involved with Priceline bid directly to consumers in a way, there is a whole slew of opportunities to take costs out through these kinds of modified auctions," Ziegler said, including auctions for backhauling or store shelf space.
Rodney McMullen, executive vice president of strategy, planning and finance for Kroger, said GlobalNetXchange "offers tremendous opportunities to improve the total supply chain."
According to Daniel Bernard, chief executive officer of Carrefour, "The potential impact of this venture will be limited only by our ability to include additional retailers in our vision of a global, Web-enabled retail marketplace."
Sir Peter Davis, group chief executive of J Sainsbury, said GNX represents "an innovative and revolutionary step change in the way retailers and suppliers will conduct their business worldwide."
