Is the New Transora Exchange the Real Thing?

SAN FRANCISCO (06/15/2000) - Consumer products companies may be late to form Web marketplaces, but they're making up for it with sheer numbers. A group of 49 companies, including Coca-Cola, General Mills (GIS) , Kraft Foods, Procter & Gamble and Unilever, announced plans today to launch an online exchange called Transora.com.

The size and number of the founding partners and the breadth of their products would make Transora, which plans to launch by the fall, one of the most ambitious Web marketplace efforts thus far. The commitment of so many large companies could make Transora one of the first industry marketplaces to handle a large number of transactions. But the sheer scope of the venture could also undermine it.

"The number of founding members is an advantage because of their huge buying volume and because they cover a huge part of the industry," says Matthew Sanders, an associate analyst at Forrester Research (FORR) . "It's also a challenge because members will have different needs. Their ability to get this up and running and satisfy each partner is going to be a monumental task."

The intense rivalry between consumer products companies, including Coca-Cola and PepsiCo (PEP) , both of which are founding members, could be another obstacle.

"One of the biggest reactions inside our company was, 'No way can this industry agree on anything; this is going to be a go-nowhere effort,'" says Calvin Collier, senior VP for legal affairs at Kraft Foods and a member of Transora's board. "But people from a lot of companies sat down and rolled up their sleeves, and it happened quickly."

The 49 founding companies are putting up a total of $238 million to launch the marketplace. Individual companies invested between $500,000 to $15 million. No company was allowed to take more than a 5 percent stake in Transora, to prevent any one member from dominating the exchange.

Transora aims to provide facilities for members to procure production and non-production goods through auctions, reverse auctions, private negotiations and requests for quote. The founding members, which spend a total of $350 billion a year on procurement, could each save millions of dollars in processing costs by moving purchasing online.

Like other industry-sponsored marketplaces, Transora plans to also offer tools to help members and their business partners more accurately forecast the demand for products. It would offer community services, such as industry news, training tools and so on, and it may offer an area where consumers can go for coupons and some services.

The marketplace would be open to any company around the world in the $1.3 trillion consumer products industry. It would charge transaction fees and other fees for value-added services.

Transora is different from many other recent marketplace initiatives, according to Forrester's Sanders, because the founders weren't content to simply sign a memorandum of understanding and then try to figure out how the marketplace would work.

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