Oracle, Sears team on online marketplace
The database software maker unveils a new venture with retail giant Sears and French retailer Carrefour to build an online marketplace serving the retail industry.
Sears and Carrefour will initially share a majority stake in GlobalNetXchange, the new online marketplace that will link them to their 50,000 suppliers, partners and distributors over the Internet. Oracle will hold a minority stake in the new venture, the companies said in a statement.
Financial terms of the deal were not disclosed.
"Our intention is to create a separate standalone B2B business that is independent and to invite additional retailers to become participants in this retail exchange," said Mary-Lou Smulders, vice president of product industries at Oracle.
Oracle said it will provide the software, implementation and support for the GlobalNetXchange marketplace, which will bring a wide range of retail merchandise online, including apparel, food and other consumer products.
Scott Latham, an analyst at Boston-based AMR Research, said the new exchange is a way for companies in the retail market to cut costs associated with their inventory and ordering process along with the way they purchase goods and services.
"(This announcement) is consistent with what we've seen happening across industries that are highly fragmented like steel, chemical, auto manufacturing...You'll see these independent trading exchanges continue to pop up," said Latham. "Really it's a way for Sears (and Carrefour) to better automate their supply chain."
A growing number of manufacturers and technology providers have been jumping into the lucrative business-to-business (B2B) e-commerce market, building trading exchanges and large marketplaces that connect suppliers, partners and customers online. Oracle, for one, has made an aggressive push to tackle the fast growing market, which Forrester Research predicts will reach $1.3 trillion by 2003.
GlobalNetXchange marks Oracle's second-largest online marketplace since its joint venture with automaker Ford Motor, announced last November. On Friday, General Motors, which teamed with software maker Commerce One for its TradeXchange, and Ford said they will merge their separate trading exchanges with DaimlerChrysler for a new online marketplace venture.
"It was fashionable to kick Oracle a year ago, but they've done an excellent job of really capitalizing in this B2B space," added Latham, who also said Oracle has proven some significant momentum by landing giants Ford and Sears for its separate marketplace ventures.
Ariba and Commerce One, considered pioneers in the market, have been joined by traditional software makers, such as Oracle rival SAP and PeopleSoft, as well as a handful of services and consulting firms. These companies have all recently made their marks by setting up industry-specific trading exchanges aimed at the auto manufacturing, oil, gas, health and pharmaceuticals industries, as well as others.
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With GlobalNetXchange, the companies intend to provide a network for members to buy, sell, trade or auction goods and services over the Internet in order to cut internal costs associated with order processing and negotiating.
Without disclosing specific details of the revenues model, Smulders said the exchange expects to generate sales by charging members fees on a transaction basis. This means a supplier or distributor will be charged a fee if they conduct any type of transaction within the exchange, including bidding for goods and services and/or buying or selling an item.
AMR's Latham said it is still unclear how and where Oracle will make most of its money through the exchange.
Initially, he said Oracle will get returns from its equity interest in the new venture, but will most likely need to set up a subscription-based revenues model vs. a transaction-based one in order to see larger returns.
The three companies said over time they expect the exchange to provide a variety of supply-chain capabilities, such as collaborative demand, automating inventory planning and delivery scheduling.
Smulders said the company is "actively seeking equity participation from global retailers" to join the new exchange and have already begun negotiations with a number of prospective participants.
The new company is expected to become operational within 30 days with its own management team, employees and capital. Both Sears and Carrefour said they intend to begin using the exchange within weeks.