GIANT EAGLE RE-SIGNS WITH FREE MARKETS

DAN ALAIMO

PITTSBURGH -- Giant Eagle here has extended its agreement to use online auction service FreeMarkets, also based here, as a platform for sourcing goods and services through 2003.

The retailer has been using FreeMarkets since early last year primarily for reverse auctions involving logistics, products for operations and non-branded merchandise.

In that time, Giant Eagle has bid more than $150 million and, by its estimates, saved more than $10 million, said Kevin Srigley, director of marketing for the chain.

The company operates or supplies 201 stores under the Giant Eagle banner; 108 are run corporately while 93 are owned by independent operators.

"We are very excited about the potential offers here as a way to obtain reduced costs that we can pass along to our consumers, which then become a point of difference for Giant Eagle," Srigley said.

The deal is seen as validating the importance of Internet business-to-business transactions while raising a question about the big trading exchanges' ability to provide all the B2B electronic services retailers need, according to industry observers.

Giant Eagle joined the WorldWide Retail Exchange, Alexandria, Va., in December of last year, and FreeMarkets ran a pilot auction for Transora, Chicago, in November.

"We are continuing to explore a number of areas, including the trade exchanges, that would offer other means of reducing costs of goods and services. So we view this [the FreeMarkets agreement] as complementary," Srigley said.

"Giant Eagle is continually implementing e-business solutions that enhance our business and our offering to customers," said David Shapira, chairman and chief executive officer of Giant Eagle, in a prepared statement.

"By leveraging the eSourcing technologies and services provided by FreeMarkets, we have been able to create successful online markets for a wide range of goods and services, and these markets have generated savings and efficiencies that benefit our operations and customers across the Tristate region."

Giant Eagle has used reverse auctions conducted by FreeMarkets to obtain goods and services in the areas of engineering and construction, transportation, information technology equipment, raw materials such as flour and sugar, packaging materials including plastic bags, and maintenance, repair and operating supplies, said Jaime A. Smith, director and general manager of the retail sector, FreeMarkets.

In a reverse auction, Giant Eagle puts out a request for quotes that is bid upon by companies screened by FreeMarkets in "QuickSource eMarkets" that can run for minutes, hours or days.

FreeMarkets has specialists in these areas who are focused on developing the online markets for specific goods and services, Smith said.

"We think that experience is unique to FreeMarkets and we don't think the exchanges have it."

Other major supermarket chains use FreeMarkets, Smith said, but he would not identify them.

But Giant Eagle uses the service most extensively, he added.