• July 7, 2000

Retail Digital Exchange Deluge

High-profile announcements of digital exchanges for the retail sector have been flying thick and fast in early 2000.

At the end of February, US giant Sears Roebuck joined with Paris-based Carrefour and technology provider Oracle to set up GlobalNetXchange. This was recently supplemented by J Sainsbury and German retailer Metro. Only a few days later, 11 major retailers in the US and Europe set up a rival, which includes the UK's Kingfisher, Marks & Spencer, Tesco and Safeway.

An in-depth report into retail exchanges by AMR Research's Janet Suleski predicts the announcements will continue thick and fast. "Trading exchanges will proliferate because standard business processes are currently inefficient, time-consuming and largely paper-based."

AMR identifies seven areas of processes that can be improved, including merchandise planning. It warns: "To take full advantage of opportunities offered by trading exchanges, participants will need to change existing business models and processes." Whether it's better to sign up now to benefit from slimmed inventory and streamlined processes or whether the risks involved are currently too great, it is clear that the available exchanges need to mature substantially before they will be credible. AMR rates a number of exchanges on four critical components--content, community, commerce and connectivity--and none is there yet.

In addition, AMR predicts horizontal, service-oriented offerings will merge with vertical industry-specific exchanges. "AMR Research expects the exchange market to evolve from point exchanges to systemic communities supporting entire business processes. Partnering will emerge as the growth vehicle for most successful exchanges." However, it warns against getting tied in to an offering that eventually reaches "an evolutionary dead end".

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