SAN FRANCISCO (03/09/2000) - Here comes the b-to-b doughnut exchange. Three corporate heavyweights teamed up on Wednesday to form a new Internet exchange for doughnuts and other junk food sold by those little convenience stores at gas stations.
Chevron and Oracle formed a joint venture with McLane Company, a subsidiary of Wal-Mart that distributes products to convenience stores across the country.
The three companies will own equity stakes in Retailersmarketexchange, the awkward name chosen for the new company that they intend someday to take public. Chevron, McLane and Oracle bring the three essential ingredients for an exchange - buying-power, product supply and technology.
More than 150,000 convenience stores do about $200 billion in business each year and no single firm has a dominant share of the market, the companies say.
Chevron, for example, is one of the largest operators but it only has about 5 percent of the stores. That fragmentation makes it a classic candidate for an Internet marketplace, which allows many buyers and sellers to do business via a central Web site. On the supply side, McLane serves 35,000 convenience stores and hopes to reach more of them through the new Web site.
The firms want to get the new site up and running next quarter, and they hope that convenience store owners will come there to buy sugar-coated goodies to stock their shelves. In some cases, large buyers will use reverse auctions to pit their suppliers against each other and drive down prices. "Chevron will say, 'I'm going to buy a bazillion doughnuts,'" says Oracle President Ray Lane.
"And the [doughnut] auction will be open every day at 8 a.m." That may be bad news for doughnutmakers but good news for convenience store owners and junk-food junkies.
To hear Oracle Chairman Larry Ellison tell it, the exchange will result in a kind of junk-food nirvana. "The product you want will always be there," he says. "It will be fresher. It will be cheaper." Ellison also said the deal will result in a more reliable supply of Slurpees during hot summer months. One problem with this promise is that Slurpees are a product of 7-Eleven, which owns or operates 5,700 convenience stores in the U.S. and Canada but is not part of the new venture formed Wednesday.
Chevron and its partners say they will welcome competitors such as 7-Eleven into the venture. If that happens, the new site eventually could grow to become the biggest junk-food exchange in cyberspace. If not, watch out for the Slurpee exchange. It's only a matter of time.