Wal-Mart alarms suppliers with Net procurement plans

Wal-Mart, the US retail giant which owns the Asda supermarket chain, yesterday announced plans to shift its buying processes online in a move which has sparked concern among supplier groups.

Wal-Mart, the US retail giant which owns the Asda supermarket chain, yesterday announced plans to shift its buying processes online in a move which has sparked concern among supplier groups.

The company said it had hired Atlas Commerce, a US-based internet specialist, to develop a private internet marketplace to help automate the group's global sourcing processes and cut procurement costs.

The system will enable Wal-Mart to demand a single quote for its requirements across different countries, creating opportunities to negotiate volume discounts and reduce shipping costs.

David Hands, a spokesman for the Federation of Small Businesses, said: "This is cause for concern. It is the sort of thing that gives all the power to the big guys while the smaller players will get squeezed." He said many suppliers without access to the internet would be excluded from the electronic exchange. Another worry is that Wal-Mart could use its massive buying power to force down prices, putting smaller players at risk.

Mr Hands said it was significant that the announcement had been made just days after the Competition Commission issued its long-awaited report into the supermarkets industry. The watchdog raised concerns about the dominance of the UK's top five supermarket chains, including Asda, but recommended only limited changes to their business practices. Mr Hands said: "Supermarkets feel they have been exonerated. It is business as usual for them."

Alan Morris, a spokesman for the Farmers' Union of Wales, said: "We would be concerned if [Wal-Mart] goes exclusively over to this system. We are encouraging as many farmers as possible to join the online revolution. But we are a long way off everyone being on the internet."

But Hugo Amoyal, UK director of Atlas Commerce, said the e-hub should not be seen as a threat. He said: "This is really meant to help suppliers automate their trading processes, which will reduce internal costs to both the supplier and Wal-Mart."

Nevertheless, the exchange is expected to attract the attention of the competition authorities. Andrew Fowler, an analyst at Morgan Stanley Dean Witter, said: "The US is looking very sniffily at internet hubs."

Wal-Mart's Retail Link is the third business-to-business hub to be officially launched in the supermarket sector. The others are the WorldWide Retail Exchange, which groups Tesco and Marks & Spencer with overseas companies such as Cora and Safeway in the US, and GlobalNetExchange, controlled by Sears, Carrefour and the technical service provider Oracle. The WWRE predicts retailers could cut procurement costs by 3 to 5 per cent by using e-hubs.

Wal-Mart already operates a limited online platform, which lets suppliers track how their products are selling in its stores.