E-BUSINESS SUMMIT

DAN ALAIMO

CHICAGO -- The Internet business-to-business market will grow rapidly in coming years and all players in the grocery supply chain need to start getting involved now, said a consultant speaking at the E-Business Summit here.

"Participation in marketplaces by manufacturers, retailers and suppliers is going to be a necessity, not an option," said Tig Gilliam, partner, PricewaterhouseCoopers, New York, who made a presentation during a seminar on the consumer products goods industry's recently announced Transora e-marketplace.

Total business-to-business spending will be $20.9 trillion in 2010, and 75% of that will be on-line, Gilliam said. "The marketplace model is a success because it can change the paradigm from connecting across the enterprise and bring all the participants in the value chain together. They can all connect to each other through the marketplace and greatly improve the efficiency of the communication and their ability to deliver," he said.

The on-line marketplaces will level the field in terms of information, he said. "Competing on the basis of having better information is going to be more and more difficult going forward. So the trick is going to be using the information to execute better. That's why we think in the early stages, participating in the marketplace, getting internal organizations connected to marketplaces, and changing the way you execute on the information that you have in place is an absolute prerequisite to succeeding in a marketplace world," Gilliam said.

The Transora model allows for broad participation by all members of the industry, he said. "It's not forcing participants to come to that marketplace, but will succeed on the basis of offering better products and services than other competing marketplaces that manufacturers, retailers and suppliers have to choose from. It's not about the enablers, its about the customer assembly. What the industry vertical marketplaces need to do to succeed is hone their customer relationships."

"The services behind the marketplace don't all have to be provided in one place. There's an ability to leverage other connections that are out there today to extend the range and depth of services," he said. Transora, GlobalNetXchange and WorldwideRetailExchange are working on interconnectivity, said Judith A. Sprieser, executive vice president, Sara Lee Corp., Chicago. Sprieser is chairwoman of the steering committee that led to the exploratory phase of the Transora initiative.

"We believe that the most efficient form of connectivity is manufacturer-to-Transora, then Transora-to-the-exchanges, and then you have the retailers connecting into their exchanges. We are going to see how that evolves. But that takes the number of connection points down considerably, and the investment that you would otherwise have to make down considerably," she said.

Gilliam predicted the eventual domination of meta-markets. "We believe that many of these marketplaces are going to begin to work together in a real way to share capabilities across the marketplaces, and to leverage capabilities across the marketplaces," he said.

"I believe that the vertical marketplaces are going to be the ones that hold the customers over the long term, and that the vertical marketplaces are going to go the horizontals in the short term to provide capabilities and services that can mean significant strategic relationships, or even merger-acquisition activities between the horizontals and verticals."

Gilliam sees a shake out of all the B2B marketplaces that have recently been announced and some connection between seemingly unrelated industries, such as CPG and the paper marketplace, for example.

Drawing a lesson from the unhappy experience of many business-to-consumer Internet merchants, Gilliam said the cost of acquiring customers was very high, while it was very difficult to retain them. In B2B, "the opportunity here of bringing customers together and acquiring customers and integrating them into Transora -- or to an industry vertical -- is absolutely essential. Once they are there, you are able to establish a customer relationship in a way that you can understand the requirements of the participants and offer the services and the capabilities that the participants need, and do it in a way that browser based connections just can't accomplish."