Computer industry sceptical of local online marketplaces

How useful are the online marketplaces being set up in New Zealand when there are better-funded international rivals that will duplicate and compete with local efforts?

Scepticism is coming from the computer industry about the usefulness of online marketplaces being set up in New Zealand when there are better funded international rivals that will duplicate and compete with local efforts.

“These networks are very expensive to set up,” says one source who did not wish to be named, “and you have to ask whether [major in-house development of software] should be their core business, and whether it is of benefit to their shareholders.”

If the commodities being bought and sold are in a vertical industry segment, he says, there may be an argument for a specialised local exchange, but where it’s a matter of “pens and pencils” and similar daily requirements, participation in an international network might be more cost-effective.

One recent major effort is the New Zealand Dairy Company’s RD1.com, aiming to bring together farmers and suppliers of “everything from fertiliser to fence-posts to gumboots,”says RD1.com chief executive Neil Murphy.

The system is in beta testing with a group of 300 farmers in many parts of the country. “We’re looking to get feedback from them on what works and what doesn’t,” so appropriate fine-tuning can be done, he says.

“I don’t think [local farmers' and suppliers' use of international exchanges] is credible,” Murphy says. “The New Zealand Dairy Group runs a chain of rural supply stores, “and I believe we have an obligation to meet the needs of our customers through new channels.”

Rival Kiwi Dairies is setting up a less ambitious network called Fencepost, concentrating mainly on information to farmers, particularly allowing them to access production and quality information on their own businesses. But “logically, we will look to providing [purchase of] farm inputs online,” says Fencepost content manager James Norman. This move will probably happen “within the next 12 months”.

Like Murphy, Norman points to the presence of an existing distribution network based on its bricks-and-mortar chain of Town and Country Agricentres. A New Zealand-based fulfilment capability like this is a very suitable foundation for an online merchandising venture, he says. “if you were starting from scratch, [such a development] would be hard yards; but we’re not in that position.”

Fencepost has started with the non-trading aspects “with a strategy of creating addiction,” Norman says. “We want farmers to start using these tools and get hooked; to make a visit to the Internet site a daily habit. “Then we can logically start to provide the trading side.”

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