ON-LINE SERVICE SEEKS TO UPDATE RETAILER-SUPPLIER LINKS

ERIC THORSEN

PASADENA, Calif. -- With the launch of its subscription-free business-to-business e-commerce Web site/company, C.H. James & Co. here is making one of the first attempts to modernize relationships between retailers and produce suppliers via the Internet.

According to Chuck James, chief executive officer and founder of the new service, ProduceOnline.com, the site changes the way in which the parties communicate, but not the essence of their relations.

"We do not plan to disrupt the relationship between the buyers and the growers," said James. "Our system intends to leave the grower/shipper/buyer relationship in place and just automate the actual transactional portion of it."

He said that there has already been some confusion in the industry regarding the site. Suppliers are under the impression that competitors will learn about their prices, while retailers are concerned about the privacy of their transactions. But, he stressed that ProduceOnline.com is not an auction-type site and that these concerns are based on myths.

"We want to preserve the [buyer/seller] relationship," he said, noting that buyers and sellers have typically used fax machines as one-on-one communication tools. He added that his site will continue to allow buyers and sellers to keep this singular style of contact and maintain full control over it.

"If a buyer requests a [price] quote [using ProduceOnline.com] he can send that to just one person, he can send it to three people or to as many people as he wants. It's the same thing for the seller," he said.

"We do not have an open bulletin board where there are just prices posted. This is a highly personalized system. It's a fax system without paper. It has all the privacy you have with a fax machine," he said.

According to James, with the elimination of paperwork, faxes and phone calls, the site will reduce transaction costs by up to 70%.

"We see the Internet as basically being to the produce industry what the ATM was to the banking industry, where you automated the routine transactions and just drove the costs down," said James.

Retail chains growing through acquisitions are encountering many different computer systems, all of which must be organized and consolidated. E-commerce sites like ProduceOnline.com can simplify operations because all transactions will be in one place. James said that if retailers want to do a search at the end of the year, they could do it either by commodity, brand, buyer or time period.

Launching this month, the site provides a single destination point for fresh produce to be bought and sold through real-time electronic transactions, he said. Even before the industry began a period of heavy consolidation, he explained, it was the advent of the Internet that made a site like this possible.

"Some of the larger and more sophisticated players in the industry conducted business, even produce business, electronically," he said. "But, those were all on proprietary networks.

"Retailers had been using their own software and hardware systems to communicate with suppliers," he said. "But, they could only use those components within [their own company]. The Internet now enables everyone to talk to everyone."

Using ProduceOnline.com, retailers can quickly exchange information with growers, shippers and other suppliers regarding purchasing needs and products available. James said that smaller retailers can also benefit from the site, because all that is required to use the site is a Web browser and a modem.

"We believe that this will also actually be a greater benefit for the smaller retailers because it is going to give them negotiating power," he said. "Now, they are going to be able to have access to a lot more suppliers and a lot more prices."

He said the cost for all retailer users should be driven down because aggressive sellers wanting to develop their businesses will realize they can lower their transaction costs, allowing them to pass on the savings to their customers.

Also, buyers and sellers will not have to worry about security issues, because the site uses 128-bit encryption coding, which is greater than some banks use, he said. "It's the highest form of legal encryption allowed," he said. "Only the person who requests the information, or sent the information, can access [it]."

In addition, the site features a Harbinger electronic language translator. The translator allows supermarkets that use electronic data interchange systems to conduct business over the site with suppliers and other users not equipped with EDI capabilities.

For example, retailers can send EDI transmissions to a supplier without an EDI system, because the EDI language is translated into a Web-based language, which allows the supplier to read it. Then, the supplier can respond using a Web-based language, which is translated back into the EDI language before being sent to the supermarket. "It allows companies to leverage their existing investment," said James.

Since there is no initial fee required to use this site, the seller pays a sliding scale fee that's based on volume. The fee is 1% and can drop below that depending on the volume a seller is putting through the system, he said.

Other features of ProduceOnline.com include a back-end system that has nearly 400,000 stockkeeping units organized by brand, variety, size, grade, packs and other criteria. Using this database, buyers can establish customized order forms with one or several commodities that get posted in the site's "request for quotation" listing. This allows them to work with specific vendors or multiple suppliers.

Users will be able to send electronic purchase orders, invoices, price quotes and payments. Other site features include real-time news feeds, discussion forums and bulletin boards, weather reports, classified ads, links to industry organizations and a career-development section containing job postings and resumes.

The site also features an "electronic storefront," where suppliers can create catalogues that include pictures, company history and promotional offers. In addition, the site allows buyers and sellers to create custom reports based on commodity, division or time period.