The retailer is developing a private online exchange to connect it to its global supplier network.
In contrast to international competitors such as Pinault Printemps-Redoute, Sainsbury and Metro, who have joined forces in developing open, public online marketplaces such as Globalnetxchange, Wal-Mart will develop a private online exchange to connect it with its global supplier network. In doing so, Wal-Mart confirms its commitment to the use of proprietary technology to obtain a competitive edge and a focus on efficiency improvement through close integration of existing suppliers, rather than through the ‘divide and rule’ strategy of online exchanges.
The development of a private online exchange should therefore be seen as a logical progression from Wal-Mart’s Retail Link system. This system has been at the center of Wal-Mart’s highly efficient supply-chain, linking vast amounts of sales and category management information, providing inputs to its collaborative forecasting and planning and providing Wal-Mart with supplier evaluation information. The proposed exchange will extend and accelerate Retail Link’s capabilities. Although it aims to cut costs and improve efficiency across the Wal-Mart organization, the initial focus will be on using the system to help improve global sourcing for the company’s international buyers.
Wal-Mart’s activities also underline some of the shortcomings of public exchanges. Although these exchanges provide large buyers with attractive cost-cutting features, such as reverse auctions, for many products they are unlikely to provide retailers with the type of consistency and control over quality, transparency and traceability that is required in today’s retail environment. The search for this type of control ensures a strong momentum behind the development of ever-closer proprietary links between retailers and their strategic suppliers. Public marketplaces are likely to play a primary role in ‘low involvement’ areas for the retailers, such as selling excess inventory or purchasing non-strategic goods.
