WHITE SULPHUR SPRINGS, W.Va. -- The cat is out of the bag.
While speculation about possible mergers between the three major B2B exchanges has been simmering for a while, the CEOs of all three organizations confirmed last week what everyone else already suspected: Heading forward, the industry probably won't support three major trading exchanges.
Speaking at a strategic issues session at the Grocery Manufacturers of America's Executive Conference here, Colin Dyer, chief executive officer, Worldwide Retail Exchange, Alexandria, Va.; Joseph Laughlin, CEO, GlobalNetXchange, San Francisco; and Judith Sprieser, CEO, Transora, Chicago, admitted that mergers between some or all the exchanges are probably inevitable. Willard Bishop, president of Willard Bishop Consulting, Barrington, Ill., moderated the session.
"The reality is we can't afford to have four exchanges," Laughlin said in response to the first question asked from the audience, which elicited a burst of uneasy laughter from the room full of executives.
"Competition is a good thing. It is very helpful to allow us all to compete in the market -- and then let the losers go the way of the dinosaurs and the winners soar like eagles." Laughlin noted that a European trading exchange focusing on the consumer packaged goods industry, similar to Transora in the United States, also existed.
"I certainly agree with Joe," Sprieser said, addressing the question of possible mergers. "There will come a time when our industry can't support the number of exchanges we have right now. What I find very encouraging, however, is the relationship between the folks that you see up here and our willingness and openness to find ways to work together."
While indicating that consolidation in the number of exchanges can be expected to take place at some point down the road, all three executives underscored the importance of the efforts and processes now under way to develop collaborative trading models to benefit all segments of the food industry.
"How did we get here in the first place? The answer is a mixture of good old-fashioned rivalry between manufacturers and retailers, overlaid with some misunderstanding and a bit of ego," Dyer told attendees. "It was helpful in that it enabled a number of different concepts to be tried. I think it has been a healthy voyage of discovery over the past year." Commented Laughlin, "There are historical reasons why WWRE is out there and why GNX is out there. And there are reasons why manufacturers have their exchange. I look at Transora as a partner on one hand and a competitor on the other."
The GNX executive went further and pointed out why multiple exchanges exist today and why merging could prove difficult. "There are reasons to run multiple exchanges. There's competition in the marketplace [and reasons why retailers] don't want to sit across the table with other retailers."
One reason GNX was formed was to enable retailers to share best practices uncovered during pilot tests. "Our exchange really focuses on quickly implementing solutions, getting experience with those [pilot tests] and sharing best practices among a small group of people," Laughlin said.
"It's up to all of your companies as well as us to figure out what is the right solution on a go-forward basis. But I tell you there is still a lot of work to be done, and it is going to cost a lot of money. What is required is active participation now," he added.
While talk of possible mergers may have made for the biggest headline from the interactive session, the executives also highlighted areas of progress and future focus for the three exchanges.
Transora has launched its subscription model to support access to the various services offered by the exchange, Sprieser said, noting "it's exciting, especially for a financial person like me, to now have revenues topping off my P&L. It's a nice experience to see a top line starting to develop. So we're in business and tracking very well."
The prime areas Transora is focusing on include rolling out procurement services and collaborative solutions; auctions; and a live collaborative forecasting, planning and replenishment tool being used by 15 manufacturers. Transora is also moving ahead with populating its item catalog, which currently has the ability to keep track of "about 150 attributes" and should soon be able to contain close to 400 attributes, Sprieser said.
At GNX, one of the biggest areas of success to date has been in auctions, which have involved an estimated $1.2 billion and 12 million transactions. "In a typical week we do somewhere in the area of 30 to 50 auctions," Laughlin said, adding that most transactions involve private-label products, not branded items.
GNX is also about to go live, for Kroger and Loblaws, with a fresh-produce exchange; it has a 16-week CFPR pilot halfway concluded with Sainsbury and several of its suppliers; and it is set to launch CFPR pilots involving Carrefour, Sears and an apparel retailer. GNX's services, he said, are moving beyond food to include categories such as soft and hard goods.
WWRE, meanwhile, now has 56 retail members, half in the United States and half in Europe and Asia. "We are making good progress in several areas," Dyer said. For example, WWRE auctions since February have saved members $55 million to $60 million, "and that's already in excess of what it cost to build," he noted.
WWRE is also forging ahead with CFPR trials. "We are now in a controlled launch of CFPR tools with 11 retailers and 11 manufacturers," including Target Corp. in the United States and Delhaize in Europe. The exchange will begin testing a catalog tool by the middle of this month, and an e-procurement solution in August, he added.
WWRE has also formally opened the exchange to the supplier community and is staying within its operating budget. "So far, so good. As Judy said, it's nice to have a top-line number emerging," Dyer said.