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TARGET EXEC FORESEES MERGER OF EXCHANGES

CHICAGO -- Merge the exchanges.That was the unambiguous and somewhat audacious message delivered by Gerald L. Storch, vice chairman, Target Corp., Minneapolis, and a founding board member of the WorldWide Retail Exchange, Alexandria, Va.Storch gave the message in a joint keynote address to both the Retail Systems 2001 Show and the Voluntary Interindustry Commerce Standards Association's Collaborative

CHICAGO -- Merge the exchanges.

That was the unambiguous and somewhat audacious message delivered by Gerald L. Storch, vice chairman, Target Corp., Minneapolis, and a founding board member of the WorldWide Retail Exchange, Alexandria, Va.

Storch gave the message in a joint keynote address to both the Retail Systems 2001 Show and the Voluntary Interindustry Commerce Standards Association's Collaborative Commerce Show here recently.

Storch said multiple Internet-trading exchanges with similar goals and services are redundant, wasteful and "stupid."

His comments became the talk of the retail technology event.

Although talk of consolidating the exchanges has become more frequent in recent weeks, Storch took center stage in an admitted effort to call the question.

"Part of what I'm doing, if it is not clear, is pressuring to make sure it does happen fast." Storch said he planned to address a WWRE board meeting where "I will be driving for immediate action on this. I would be very disappointed if we did not make significant progress on this by the fall."

Referring primarily to the three big retail industry exchanges, WWRE, GlobalNetXchange, San Francisco, and Transora, Chicago, but also mentioning the proprietary Retail Link project of Wal-Mart Stores, Bentonville, Ark., and the European exchange CPG Markets, Storch said the industry was on track to spend a half-billion dollars on building the B2B marketplaces with very little to show for it.

"If I could be king for a day, I would snap my fingers and have everybody realize that there is no proprietary advantage in doing this, that we need to do this together and do it fast -- and I mean everyone," he said.

He compared the competition between the exchanges to World War II soldiers who didn't know the war was over. "We've got to stop fighting last year's war. It's time to come out of the jungle, figure out where we really need to go and get it done fast, because we are wasting time," Storch said.

The original concept behind the exchanges was to create a means of business partners being able to look all the way back through the supply chain, even to the raw materials, and then forward out of the stores to the consumer, he said.

"The only way we are going to get that is by working together. Size is obviously an advantage. This stuff is expensive. Duplicating what we are doing is just stupid at this point," he said.

There is no likelihood of the initial public offering that GNX had once envisioned, and focusing on sunk costs is "an economic fallacy," he said. "Whatever we have already spent is not the issue. The issue is looking forward, what are we able to do to advance the cause," he said.

Addressing the question of competitors working together, he compared the need for an exchange to a race track and the different companies using it to the race cars.

"When it comes to building your car, some people have Porsches and some are going to have Yugos, but we need to build one race track," Storch said.

Similar to a recent panel where the chief executive officers of GNX, Transora and WWRE all agreed there were too many exchanges, others at the show applauded Storch's viewpoint.

"I agree with Mr. Storch's assessment," said Nicholas L. Ioli Jr., senior vice president, chief information officer, A&P, Montvale, N.J.

"I think the buyers and sellers have to come together and the only way that is really going to happen is if we get some clear direction and unification around the exchange issue," he said.

"Gerry Storch took a leadership position and actually a visionary role today in advocating for the consolidation of Transora, the GlobalNetXchange and the WorldWide Retail Exchange," said Greg Girard, vice president, retail application strategies, AMR Research, Boston.

"Clearly the three exchanges have a lot of overlapping functionality. They are duplicating costs and ultimately trying to serve very similar sets of companies in the same supply chain, delivering much the same service or product. Consolidation makes absolute sense," he said.

Getting all the parties who have invested financial, personal and corporate political capital to agree will be another matter.

"That's a big question. It's going to be driven by the questions of economics and ROI, but it is also mitigated by questions of ego and reputation, and that may be an issue," he said.

Another consideration is the many talented people who gave up other good jobs to work in the so-called "new economy." Some were questioned about Storch's comments during a B2B seminar at the show.

"There are probably too many exchanges right now," said Johan Sauer, lead, sell-side services, Transora.

"We are collaborating today," said Cindy Cruzado, director, exchange operations, WWRE, who emphasized she was not speaking on behalf of the WWRE leadership team. "We have talked about standards, but we are doing a lot more than that; we are collaborating in pilots in global data synchronization, an effort with the Global Commerce Initiative. We are collaborating at lots of different levels with the GCI groups. I think that collaboration on standards is driving best practices; it's pulling the membership together in ways that we have never seen before along the lines of existing trading relationships," she said.

Disagreeing with Storch, Bharat Popat, vice president, product management, GNX, said there was room for the different exchanges because of the many technologies that need to be mastered and the many cultures covered by these global organizations.

"Carrefour, as an example, is in 29 countries, operating in many different languages," he said.

"If you think about all those challenges, with technology, process, languages, cultures, just to get one product and service operating, I think what will happen is that you will get a large number of exchanges that will get it right for maybe a few products or services, and because they are delivering value, participants will pay for them to exist. That's the way I think it will map out," Popat said.

UCCnet, Lawrenceville, N.J., which is providing synchronization services to the exchanges as well as other companies is officially neutral on the issue, said Emil Martinez, vice president, business development.

"It is our feeling that we would like to see the trading exchanges succeed and do the things that their investors have enabled them to do.

"However, we are essentially agnostic to how these companies provide those services. It is more important that the individual trading partners are able to be part of the international trading community. So whether there is one or three, it makes no difference to us," he said.