PLEASANTON, Calif. -- One of the country's largest supermarket chains has become the first to publicly announce an alliance with a third-party e-commerce Web site to source fresh foods.
Safeway signed an agreement with Torrance, Calif.-based Agribuys to begin buying produce through the site, beginning with several offices in the retailer's home state. "Doing business online is just another way to source product in an efficient manner," Debra Lambert, Safeway's corporate public affairs director, told SN. "It's beginning with some of our buying offices here in the West, because that's where most of them are."
The agreement was announced during a recent meeting with California-based grower/shippers supplying the chain. Lambert declined to specify the number of buying offices involved, as well as the number of produce items being bought through Agribuys' system. She did note, however, that the decision marks a milestone of sorts for both the retail and e-commerce industries.
"Safeway appears to be the first large supermarket retailer in the industry to be operating with this type of [business-to-business] concept in the perishables side," she said. "We're not aware of any other supermarket company that's purchasing or working to purchase produce in this manner."
Gary Bennett, vice president of marketing for Agribuys, was similarly reluctant to divulge details of the pact, but acknowledged Safeway is the largest retailer to sign with the company to date.
He added that the chain's buyers have been learning to use the various components of the Agribuys platform.
"When we sign on any retailer, we offer complete, hands-on training with their buying personnel," he said. "The buying side is much more complicated than the selling side of the software, so it requires a little more computer literacy, and training in the functioning of the program."
Disclosure of the agreement led some industry observers to speculate how Safeway's decision to use a third-party e-commerce Web site will influence the retailer's participation in the WorldWide Retail Exchange, formed earlier this year. Lambert would not comment in regard to the multi-retailer confederation, but noted "this [alliance with Agribuys] came as a result of us moving into that field."
WWRE, the $100 million, Web-based business-to-business exchange announced in April, is comprised of international food, drug and general-merchandise retailers, including Safeway, Albertsons and Ahold; as well as U.S. companies CVS, Kmart, Target and Walgreen's; French retailers Casino and Auchan; and Marks & Spencer, Kingfisher and Tesco from the United Kingdom [see "12 Retailers in Global Exchange for B2B on Web," SN, April 10, 2000].
The initiative was the second such launch of a business-to-business platform involving major food retailers. The other, GlobalNetXChange, was created in March by Sears, Carrefour and Kroger, among others.
Bennett said that the potential benefits of any Web-based exchange for large chains like Safeway -- with more than 1,650 stores in the United States and Canada -- are enormous. In one hypothetical example focusing on efficiency, Bennett said a single buying office, responsible for sourcing 800 items for 200 stores in its marketing area over a four-week ordering period, may experience an error rate of one-half of 1%.
"On the face of it, this figure may seem acceptable," he said. "But, when converted to hard numbers, that one-half percent equals 1,000 mistakes. That's a lot of wasted time spent trying to fix paperwork that was supposed to already have been processed and completed."
Aside from buying office applications, Safeway will be able to take advantage of store-level templates that enable department managers to enter four-week estimates, he said. These orders are sent to the regional buying office, where they can be modified before the entire market area's bulk order is aggregated for the Request For Quote phase.
Suppliers are also receiving training from Agribuys support personnel, in the form of seminars in numerous California growing regions; on-site visits by regional service managers; and live interaction through both telephone and the Agribuys Web site, which displays a "live help" button on the screen, said Bennett.
