Restructuring to Accommodate ICT
Freshnet, however, operates with a distinctly different business model to the third party-owned Southfresh brokerage model. Rather than operating the marketplace as a brokerage bringing together buyers and sellers, the software is now used as a proprietary system enabling Foodstuffs buyers to purchase products from the suppliers who wish to supply the co-operative. Whilst Foodstuffs fish buyers may still purchase fish using traditional methods, buyer use of Freshnet is being strongly advocated, especially within Foodstuffs Auckland. Under Foodstuffs ownership, Freshnet purchasing has expanded to include the purchase of boxed beef. Despite the investigations done by Southfresh into the use of the system for fresh fruit and vegetable purchases, Foodstuffs management has rejected use of Freshnet for these functions.
Freshnet is thus not fulfilling a "marketplace" function of bringing buyers and sellers together as the Southfresh system did. The system is now an automated stock management, order processing and management information system for a group of three regional co-operatives covering New Zealand. Despite the lack of compulsion for either suppliers or buyers to use the system, Freshnet bears a closer resemblance to the "powerful buyer requiring suppliers to use a specified model of supplying" than a marketplace. Indeed, the business model it most closely represents now is a supply chain management system. By buying the Varenti software and "privatising" the system, Foodstuffs has ensured that the storeowners in its co-operatives have secured the transaction cost savings and product availability benefits, whilst "closing out" rival supermarket chains from enjoying these benefits.
The Foodstuffs purchase of the software was thus a strategic investment in the highly competitive low margin supermarket industry. Benefits previously available to non-Foodstuffs buyer-users of the system, such as restaurants, have been lost. Fish suppliers who were previously using the system to supply non-Foodstuffs buyers have also lost benefits. However, it is plausible to conclude that, in a competitive market for the purchase of the system (it was offered for sale on the open market), the incentives for Foodstuffs to buy were greater than for any of the other marketplace participants to succeed either singly or collectively in outbidding Foodstuffs. Whilst it is acknowledged that Foodstuffs had a co-ordination advantage in that the co-operative was able to collectively represent the interests of many individual buyers in the purchase process, whereas suppliers and other purchasers did not necessarily have access to umbrella groups to undertake such negotiating, had the losses been sufficiently large that they threatened the viability of these businesses, then one might have expected such coalescing and co-operative bidding activities to occur. One might also have expected to see disadvantaged companies trying to work with Foodstuffs to maintain the products traded in the marketplace that Foodstuffs was not trading, such as automotive parts, once the sale to Foodstuffs was finalised. That this has not occurred confirms the market's assessment that the perceived benefits in total for all traders in the products supported by the Southfresh marketplace did not exceed the costs of owning and operating the system. In the perishable goods market segment, however, where positive benefits have been perceived, the system has been reincarnated.
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