Technology is not enough
The AFR published an article about iRexchange, “the digital start-up threatening Metcash’s dominance of the $18 billion wholesale grocery market”. iRexchange operates a supplier-retailer portal and two years ago claimed that it would be turning over $8 billion by 2018. Predictably, this did not eventuate, because order taking and processing is only a minute part of what Metcash does. The most important part in the iRexchange business model, the logistics, had to be handled by DHL and Emergent and we can’t see how distribution companies can compete with a specialist grocery wholesaler at their core game. Also, the only way an independent grocer can have a meaningful relationship with a supplier is via volume. So, groups such as Ritchies in Victoria or Drake in South Australia can source directly and they have the infrastructure to do so. They don’t need a third party portal, so we think that iRexchange is overly optimistic thinking that they will still get to $8 billion in the future.