Norcross puts $5m into e-business

By ADAM GIFFORD

As electronic marketplaces and e-business software vendors struggle or hit the wall, privately owned printing firm Norcross Group has invested a further $5 million in its e://volution subsidiary.

Henry Norcross, managing director of Norcross Group and e://volution, said the money would be paid in stages over three years as a secured loan.

It would not affect existing shareholdings - a minority stake in e://volution is held by Contact Energy, which invested $2.5 million a year ago.

"It's an expression of confidence in where we have got to. We wanted to shore up the future of our product and our company for the next three years," Mr Norcross said.

"The Norcross companies - our print operation, Avenue Publicity and Norcross Office Products - have had phenomenal success winning business with our sell sites.

"Those companies need to support this technology to ensure its sustainability for the group."

He said the closure of Biolab's Onezone online marketplace was a disappointment, but there were some tough lessons to be learned about e-business.

"They built their return on investment case on projected revenues. We built it on actual revenues in Norcross Group.

"We're used to buying printing Machines for one or two million dollars, so we knew we could handle the initial investment required.

"Then we looked at whether we could defray our costs by sublicensing ... "

"If we hadn't sold any other sites, we would have continued with it, but at a lower level."

As it is, e://volution has picked up other customers for sell sites, buy sites and electronic marketplaces.

It last week signed a contract with Australian industrial ceramics maker Pyrotech to build a site handling indirect purchasing.

It has also been selected to build a "business front" for a Carter Holt Harvey subsidiary to allow better interaction with customers.

Darren Wallbank from CHH e-commerce services subsidiary Velocity, which assessed and recommended the Siteworks solution to the unnamed subsidiary, said e://volution offered a functionally robust and cost-effective solution which fit medium-sized companies.

He said the value was more likely to come from things like rationalisation of supply chains rather than just reducing the cost of transactions.

Mr Norcross said e://volution had also realised the limitations of trying to make its money collecting a fee for each transaction it handled, and had shifted more to a service model, with companies paying a monthly fee for hosted e-procurement sites.

Its transaction turnover had dropped from a high of over $1 million a months to about $750,000 as it stopped promoting pure sell sites.

"It was costing us more to deploy sites than we were getting in transaction fees.

"The fact is people are now paying us to build buy sites. That's just started happening over the past six months.

"Companies are now willing, based on good business arguments, to adopt electronic procurement."

Mr Norcross said savings could come from improved spending, savings through electronic payments and better logistics.

To capitalise on the trend, Norcross Group is also setting up a new subsidiary to handle third-party logistics, so orders can be aggregated.

Other companies which appear to be weathering the storm have taken a similar approach to Norcross.

In the printing industry, Dunedin's Wickliffe Press also has a strong e-commerce solution.

Conduit, the hosted e-commerce solution provider set up by IT products distributor Renaissance Group, is also winning business in Australia and New Zealand despite being knocked back in Asia.

And fish broker Southfresh is breaking even with its online wholesale fish market, and is expanding into other perishables.