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RETAIL VIEW: E-commerce remains part of the buy-sell equation

It burst on the scene a half-dozen years ago promising a changed new world where all transactions would be done electronically, and just one touch of the keyboard would create the order, the invoice, the bill of lading and everything else associated with that transaction.

While its bark proved to be much bigger than its bite, today e-commerce is a routine part of the produce industry with many transactions being instigated and finalized electronically.

E-mail, of course, has become a regular part of doing business, playing the same role as the telex, the phone and the fax in their day. Many buyers and sellers communicate almost exclusively by e-mail, as it has become a much quicker way to do business -- and one where the personality of each can still come through without the accompanying verbiage that turns a quick phone call into the need to develop an exit strategy.

But e-commerce is much more than that, and at least part of what was promised at the turn of this millennium is coming to fruition -- albeit in a much less crowded field.

"There are now basically two players," sent Kent Rhodes, the founder of Foodlink, which recently merged with Agribuys and became the produce platform for that e-commerce company under the FreshLink banner.

FreshLink is sharing the business space with iTradeNetwork. A quick survey of shippers revealed that most major shippers use both systems depending upon the desires of their buyers. Each of these e-commerce sites has teamed up with major retailers to be the e-commerce partner for their transactions.

As such, if one is doing business with Albertsons, for example, he or she will most likely be conducting that business through the iTradeNetwork. If one of the Ahold companies, such as Bruno's, is the buyer, a seller would also be on the AgriBuys' FreshLink system. Mark Crossgrove, sales manager for The Nunes Co. in Salinas, CA, confirmed that he and his sales staff do business over both systems, simply because their buyers request them to. "We don't do the sales over the Internet, but we do fill the orders. It is a way to deal with existing customers without having to call or fax every day.

Mr. Crossgrove and others interviewed said that these systems work best with established customers that are on a program with you. Basically these Internet-based systems allow for the creation of a private network between buyer and seller, which allows for the exchange of information that creates and tracks each transaction.

Rob Bonavito, president of iTradeNetwork, tried to take this reporter through the system verbally, and was quickly talking two feet over my head. "We are based on an ASP model, he said. He also added something about an ERP model. For the uninitiated, those initials stand for Application Service Provider and Enterprise Resource Planning.

Most important, he said, using an e-commerce company such as iTradeNetwork allows a company to outsource its technology needs. The grower-shipper can concentrate on the market and allow iTradeNetwork or FreshLink to manage the firm's electronic transactions.

Using economies of scale, Mr. Bonavito said that these produce firms can have access to the best hardware and software available and they do not have to devote time or resources to that element of their business. They can focus on what they do best.

Mr. Rhodes said essentially the same thing. Each e-commerce company promised that they were the best and offered solutions that the other did not. That argument is best served by individual companies exploring the two options and seeing what best fits their needs.

Mr. Bonavito said that there are many advantages to electronic transactions, but one of the more obvious is the reduction in errors. Although all companies are not integrated with the iTradeNetwork or FreshLink system, some are. For those that are, a transaction can be entered once and create the accompanying paperwork without any additional data entry -- and, most important, without any errors in the transmission.

It is an accepted fact that errors are commonplace in produce industry transactions. For years, everything was done by oral contract, and then each party to the transaction had to go to his own accounting departments and fill out the many pieces of paper needed for that transaction. Obviously, there were lots of opportunities for errors -- and lots of errors occurred. Reconciliation of errors at both ends is a major job still today.

Mr. Bonavito said that studies have shown that error rates are reduced tremendously by using an ASP model. That is one of iTradeNetwork's main selling points.

However, Mr. Crossgrove of Nunes said that his firm isn't quite there yet. "We still have to double entry everything, he said. "So we are not realizing those savings yet.

When the firm upgrades its computer system, which it is in the process of doing, the Nunes executive said that the company will have full integration with the two systems, and double data entry will be eliminated.

Mr. Rhodes of FreshLink said that evolution of e-commerce will be a huge step forward. While it has been slow in coming, he said that can be attributed mostly to the fact that the produce industry has not had standard language. A buyer uses different coding in his system to identify an 88-count Red Delicious apple than the seller uses. Integrating those two numbers is a challenge. But it will soon to be solved.

Mr. Rhodes said that the Produce Marketing Association task force that he sits on is expected to release a universal product catalog at its Retail Produce Conference in June. That, said the FreshLink founder, will help everyone take a giant step forward toward integration.

He said that both iTrade and FreshLink have agreed to work together so their systems are compatible. Each shipper will only have to have his or her product catalog integrated with one system and will still be able to work through the other. Mr. Rhodes estimated that within 12 to 18 months, the integration capability will be widespread and e-commerce can start delivering on some of its earlier promises.

Besides order efficiency and error reduction, e-commerce also promised that it would be able to facilitate the production of much new useful information because of all the information it was gathering as a result of the transactions. Mr. Bonavito said that the promise is already being delivered to some customers, but he said that the industry is only at the tip of the iceberg in how the Internet can be used as an information source.

As the system evolves, it may be used for many more things, including finding new suppliers or new buyers, but currently that is not often the case. However, when buyers join a system such as iTrade or FreshLink, they do create a list of suppliers that are in their private network, and they can use this list as often as they want to call for quotes. As a practical matter, Mr. Crossgrove of Nunes said that it is not being used in that manner very often.

The pricing of this service has also changed over the years to a subscription basis. Both shippers and retailers pay a monthly fee based on usage. Each also pays on a per-job basis for the integration of his own system.