B2B sales suffer from use of outdated computers

In setting up Supplyzone, founder Neil Taylor was surprised at how many suppliers were still using out of date computer systems.

The site (www.supplyzone.co.nz) sells stationery, office furniture, mobile phones, computer equipment, alcohol and food from suppliers, including Collins, Nokia, Nestle and Chelsea (via Woolworths) and Lion Breweries (via Liquor King).

In some cases orders are not linked directly from the site to suppliers' computer systems but are relayed to the supplier by fax.

Supplyzone also had to help some firms get their inventory into an electronic form so they could keep their stock lists up to date.

That was in sharp contrast to Mr Taylor's computer goods site, www.networksdirect.co.nz, set up in April last year from his Kohimarama home and linked directly with distributors Tech Pacific's and Renaissance's back end computer systems.

The site did $1.5 million in sales in its first year from 5000 customers. That convinced Mr Taylor to expand his role as an electronic go-between. Unlike most e-procurement sites, Supplyzone and Networksdirect are open to all - offering discounts of about 5 per cent on some products. Mr Taylor says that has been useful in building awareness, and while he does get orders from individual consumers, around 70 per cent are from businesses, including companies such as Lion Nathan and Wilson and Horton.

He says the real gains for businesses come when they commit to a set level of buying for the year that will give them further discounts.

The threshold for commercial discounts on the site is around $60,000 spending a year. Firms can get further discounts of 1 to 2 per cent if they pay by direct debit.

Supplyzone follows a similar formula, providing businesses with aggregated bills for their purchases from a range of suppliers.

Mr Taylor says website sales, while growing rapidly, are still a relatively small part of the total e-procurement market. That is why Supplyzone has an 0800 number for telephone sales. The company now has eight staff and is aiming for $4 million to $5 million in sales in its first year.

It faces stiff competition from the larger e-procurement marketplaces such as e://volution and SupplyNet and other heavyweight players entering the market.

Such sites concentrate initially on attracting the procurement business of large corporate customers, but they also have plans for the small to medium business market.

E://volution, which recently received a $2.5 million cash injection from Contact Energy for a 30 per cent stake in the company, is one example.

As well as getting the benefits of "business to business" online procurement for its own needs, Contact plans to use its bulk-buying clout to develop a web-based marketplace for its 500,000 electricity and gas customers. Initially it will target its 65,000 small and medium-sized business customers - 70 to 75 per cent of which have internet access.

Similar opportunities exist for other e://volution users which include Avis, DB Breweries, Sky TV, Ford and Southern Cross.

Clear Communications is also reselling e://volution e-procurement services as part of its Trading Point e-business offerings.

Similarly SupplyNet, which is half-owned by GSB Supplycorp, 30 per cent by Qixel and 20 per cent by Advantage, has spent close to $15 million setting up its e-procurement and is keeping entry costs low for small and medium-sized companies.

SupplyNet is built with CommerceOne software which is used by trading hubs all over the world, providing the possibility of interconnected marketplaces that will allow New Zealanders to buy directly from overseas suppliers.

Another trading portal likely to have impact here is corProcure, now being developed by 14 of Australia's largest companies with technology from SAP and Commerce One, Telstra and PricewaterhouseCoopers. It will compete against Cyberlynx powered by Ariba software and combining the strengths of the Commonwealth Bank, Woolworths, Lion Nathan, EDS Australia and Telecom New Zealand.

But e-marketplace mania doesn't stop there. Telstra and SAP have announced a separate $20 million plan for mysap.com - an internet-based trading portal for the Asia-South Pacific region.

Telecom and EDS have a plan too, through esolutions, to provide e-procurement using Ariba's software. Then there are companies such as Wickliffe that have been providing electronic ordering services for some time, but have since web-enabled their systems to enter the wider e-procurement market.

Links:

www.supplyzone.co.nz
www.networksdirect.co.nz