A new online trading platform for retailers and fmcg suppliers appears to herald the coming of age of grocery e-commerce. But is there a market for it, asks Nick Hughes

Last week, the hammer fell on one of Ebay's strangest-ever auctions. One million fruit pies, originally destined for Asda, were rerouted via the consumer auction website after the supermarket cancelled its order, sold for £124,000. "Quite possibly the largest and most bizarre item we have ever sold," was how Ebay e-commerce manager Luke Schonenberger described the haul.

It may be the first and last time such a consignment appears on Ebay. The launch of a new business-to-business online trading platform, on 9 November, promises to provide the grocery industry with its very own answer to Ebay.

Called Emarket, the business was founded by the UK-based Ravi and Suraj Sharma, with two French business partners, Manuel Dieryck and Lionel Laurenco, and is a spin-off from Veles Trading, a wholesaler and distributor that worked with European manufacturers to dispose of their residual stock. Veles' 60m annual business will fold into Emarket, according to director Ravi Sharma, who prior to setting up Veles in 2004 ran a south east London wholesale operation called Soma, with his brother.

Emarket will give manufacturers, wholesalers and retailers across Europe the ability to connect and trade, in real time, through a neutral interactive platform. On each completed transaction, it expects to levy a 3% charge, with Emarket also securing revenue from an annual membership subscription (see box, p39).

Not surprisingly, Sharma is bullish about Emarket's prospects. It already has 600 members signed up, including major multinational suppliers such as Kraft and Kimberly-Clark, and Sharma says he delayed the launch by a fortnight to allow a further 400 businesses to register and start to upload offers, following a recruitment drive at the recent Anuga food show in Cologne.

More than 2,000 offers have already been uploaded to the site, with wholesale quantities of major brands such as Pepsi, Pantene and The Famous Grouse whisky available to purchase.

For buyers, says Sharma, the ability to find the best price on products from across Europe, in just a few clicks, makes Emarket a compelling proposition.

"The beauty of this is it saves so much time and effort. You stick in your requirements and the system automatically calculates the delivered cost anywhere in Europe. You can just click and buy."

For sellers, it is equally compelling, he believes. Although Western Europe's distribution channels are well established, Sharma claims to be talking to "a number of leading brand owners about handling all their export sales, including sales to existing customers, and they see 3% as amazing value. Distributors and wholesalers would ordinarily charge between 5% and 10%."

So it's not just a vehicle for the growing grey market (see p40)? "Not at all," says Sharma. "Emarket can service areas that traditional distributors find it hard to reach. We're talking to people like Heineken and Nestlé about using us to shift residual stock or target duty-free channels. We're also in discussions with wholesalers who are looking to buy that kind of stock or widen their customer base. And there are a lot of supermarkets outside the EU in Armenia and Saudi Arabia, for example looking to buy EU products too," he adds.

As well as major multinational suppliers, Sharma envisages the service attracting niche brands looking to gain traction in the market. "It brings really good visibility to new brands. Take energy shots, for example. Buyers can see the best price available, worldwide, on a delivered-to-their-door basis for any shot."

Even the UK supermarkets are on his hitlist. "I think the UK multiples will come on board," he says. "We've had a lot of people from the major multiples who were here [in Cologne] to survey what products are available on the market at what kind of prices. They want a tool at their fingertips to compare prices."

Sharma's confidence is supported by Emarket's early success in France, where all the top five French multiples bar Carrefour have subscribed. Sharma also claims to have had interest from UK wholesalers. But James Bielby, chief executive of the FWD, can't see Emarket being used by the wholesale sector here. "They'd essentially be buying at wholesale prices rather than direct. I suppose if it involves more difficult-to-reach markets there might be a case, but I would suggest that sort of business will be marginal."

He's not the only sceptic. "Much of what they are selling is likely to be stuff that no-one wants," claims a grey market specialist. "If you have a good product at the right price, you will have no trouble selling it. I suspect that what will end up here are products that aren't as attractive. No-one has any trouble at the moment selling shiny cans of Coca-Cola if you are offering a good price."

Another wholesaler points out that, unlike Ebay, you can't even bid for items. "It's not an auction at all, online or off."

Sharma says key clients can in fact make bids offline, where appropriate, using Emarket's business development managers. "We went down this route to give buyer and seller some level of certainty and so as not to have people constantly making and responding to bids." He also promises to introduce an auction section "in the next few months", for residual stocks only.

Besides, comparisons with Ebay only go so far, Sharma adds. "Unlike Ebay, we take responsibility. We are the principal in the transaction, and physically take ownership of the good. We are also responsible to the seller to make payment.

"It's also a more personalised tool than Ebay. Suppliers can choose specific countries and sales channels to target. They remain in control of where offers are made and where goods are sold. And they get full reporting on where enquiries are coming from."

What the trade does agree on, however, is the opportunity for online trading in the future. Since its reverse takeover into Blueheath, Booker has seen online sales to its cash & carry and delivered customers soar. From £15m in 2005, it expects sales to hit £330m in 2009, with online up 88% to £180.8m in the first half of 2009/10. CEO Charles Wilson believes "the appetite among our customers for using the internet has changed. You can see them talking about us on Twitter. As the market opens up with broadband and even mobile phone technology such as 3G, it will become available to a greater number of [retailers]."

"Advances in technology over the next five years will make it easier for [independent] retailers to use the web," Bielby adds.

Which is why Sharma believes the time to strike is now. "Prior to Emarket, there were innovative launches, but they were maybe slightly before their time. Now we have the infrastructure to go to people and say, 'you can order a full truckload of fmcg goods online and get delivery'."

"The proof," he adds, "will be liquidity: how many people engage and how good these offers are." Luckily, we won't have long to wait to find out if the idea bears fruit, or if it's all pie in the sky. "But based on the offers we're seeing, we're confident it will work."

Introducing ‘eBay for the grocery industry’ (31/10/09)