Tesco's Retail Exchange reaps rewards

Tesco has nearly reclaimed its $2m investment in an online marketplace after only a few months.

The UK's largest supermarket says that suppliers have been converted to competing through the WorldWide Retail Exchange's reverse auction capability.

"Several of our suppliers asked: 'Isn't this e-shafting us?'," said divisional director, Barry Knickel. "But now they like the discipline and the chance to go for things they might not have got otherwise."

Knickel said the e-marketplace allowed any supplier to quote for an order. Previously, the cost of producing and replying to invitations to tender meant only a few firms knew about the contract.

Tesco, along with Marks & Spencer and US firms including Wal-Mart, announced the US-based WorldWide Retail Exchange in August this year.

Tesco has calculated its savings by comparing prices paid using the e-marketplace with estimates of how much it would have paid via traditional negotiating. Purchases have included laptops from Dell.

Knickel said that use of techniques such as reverse auctions, where suppliers undercut each other, made sustaining business relationships tough. But the supermarket and suppliers all want to please consumers. "That's where the trust comes from," he said.

First published in Computing