Retail Exchanges Plan Merger
To Vie With Wal-Mart
By JANET ADAMY
Staff Reporter of THE WALL STREET JOURNAL
April 26, 2005; Page B7
Two major retail supply-chain exchanges are merging in the latest effort by stores to gain scale that will help them compete against Wal-Mart Stores Inc.
The rival exchanges, GlobalNetXchange LLC and the WorldWide Retail Exchange LLC, will form a combined online marketplace aimed at reducing the cost of buying goods and making it easier for stores and suppliers to trade data. As part of the transaction, the exchanges will contribute about $10 million each to the combined company. The deal is expected to close by the end of June.
The new international exchange will include about 50 food, drug and apparel retailers, including Carrefour SA, Sears Holdings Corp., Walgreen Co., Kroger Co. and Federated Department Stores Inc.
Such online marketplaces were supposed to reshape the way that retailers interact with suppliers when the exchanges emerged five years ago at the height of the e-commerce frenzy. Since then, industry observers say they have sparked only small, albeit important, changes.
Executives of the planned company hope that by creating a bigger and more sophisticated marketplace, retailers will be better equipped to face off against Wal-Mart, which is known for its highly efficient supply-chain management system. The combined exchange will facilitate transactions for a retail group with about $1 trillion in combined annual sales.
Members of the exchange are "now focused more against Wal-Mart than one another," said Christopher Sellers, chief executive of WWRE. He will serve as executive chairman of the new exchange, which has yet to be named. Joe Laughlin, chief executive officer of GNX, will be the CEO of the new company.
The exchange will lower the price of goods for retailers using online auctions, a tool honed by GNX. For example, if a grocer wants to find a vendor to provide store-branded fish sticks, it can pit fish suppliers against each other to compete for the business.
The new system will pull together data from suppliers and smooth it into a more standard format for retailers, a strength of WWRE. Making retail data more uniform is important in helping the industry to eventually replace bar codes with information-rich radio-frequency tags that Wal-Mart has been advocating.
GNX was formed at the beginning of 2000 by Carrefour and Sears and accepted members by invitation only. WWRE was formed as a rival about one month later will 11 retailers. The partnership was open to all retailers.
At the time, online exchanges were springing up across a number of industries, from autos to medical products, and promising big cost savings. In the retail industry, they have managed to reduce some buying costs and streamline product data, but "they certainly are not revolutionary," says Andrew Bartels, an analyst with Forrester Research. |
