E-markets that work

Despite widespread belief that e-markets are dead, retailers in Canada were advised this week they should be looking to them as future of their business.

In a presentation to the Retail Council of Canada in Toronto this week, PricewaterhouseCoopers partner Ilya Bahar examined the promise of e-markets after a tumultuous year in which many analysts declared the model dead. He said e-markets are beginning to deliver value and even small to medium-size businesses should sit up and take notice.

In his presentation, The Emergence of eMarkets: Revolutionizing the Retailer/Supplier Relationship, Bahar said top performing retailers have become early adopters of e-markets, using both private and public B2B initiatives that reduce purchasing costs.

Bahar said e-enabled supply chains are reducing transaction and material costs, while enterprise portals are reducing corporate overhead.

“But it goes beyond the supply chain to enabling new players to access new markets,” he said.

PricewaterhouseCoopers predicts B2B spending will increase significantly over the next decade, with 75 per cent of retailing and manufacturing transactions taking place online. Further to that, 54 per cent of all spending will happen through e-markets, while the balance will buy and sell through private networks.

“This will replace manual and EDI transactions,” he said.

Private exchanges occur with large retailers such as Wal-Mart and Loews where they deal with their suppliers in one location.

Other marketplaces include industry consortiums such as the World Retail Exchange (WRE) and the GlobalNetXchange (GNX), founded by leading companies in a sector such as retailing or manufacturing. The GNX was created by Sears and French retailers a majority stake in the online marketplace that links them to their 50,000 suppliers, partners and distributors over the Internet.

Members of such e-markets create liquidity and adopt a set of industry standards and demand a membership fee.

Thirdly, horizontal exchanges are typically founded by one institution focusing on one commodity such as banks.

Bahar said e-markets that did not survive the past 12 months didn’t have the industry, financial or buyer support that exchanges such as GNX have had. He cautioned that North Americans are behind when it comes to the adoption of such e-marketplaces.

“The Europeans are taking the emarket movement very seriously,” he said.

Promoting the use of e-markets, Bahar said retailers can save money by reducing the cost of purchasing through the use of auctions and e-procurement.

“They can have a bottom line profitability impact with a reduction in the cost of purchasing from suppliers,” he said.

As well, e-markets promise to streamline communication and create collaborative relationships between trading partners and improve buying efficiency.

Bahar said few retailers have taken advantage of auctions, even though typical savings are estimated to be 9.8 per cent. Most are beginning with the purchase of office supplies via auction.

“It is the most popular service of all emarkets and you don’t have to be an equity member of an auction, you can simply pay the fee and go in,” he advised, adding retailers shouldn’t stop at the buying and selling of goods through emarkets.

“In the future, we will see most companies base their business initiatives on real time, in this mix of B2B, don’t limit yourself to exchanges, it’s about collaboration, not exchanging POs and invoices. It’s time to get in the game – this is the time, if you haven’t done so to get into the game.”

While in the past the cost of creating the IT infrastructure to participate in e-markets may have limited the small to medium-sized business, Bahar said that has changed.

“Those who couldn’t afford the technology before can now. Small retailers can use e-mail and pay small transaction fees. You don’t need the investment you needed before.”

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