Digital start-up iRexchange says it has signed up almost 500 independent food and liquor retailers and 150 suppliers as it moves to shake up Australia’s wholesale market.
After initially launching in Victoria, NSW and parts of Queensland in January 2017, the company is expanding into other states as it seeks to establish a national footprint.
iRexchange enables independent retailers to order stock directly from suppliers through the company’s cloud-based B2B platform. It charges a 2% service fee and $1-per-case distribution fee, a fraction of the fees charged by other wholesalers such as Metcash. Freight is billed separately.
Its website currently features weekly liquor deals for both NSW and Victoria.
The company boasts a strong leadership team, with Andrew Reeves as Chairman. Reeves is a former managing director of Coca-Cola Amatil’s Australian bottling business, Lion Dairy and Drinks and George Weston. Other non-executive directors include former CUB and Seek executive John Armstrong.
“There’s huge potential for this new technology platform to have a really significant impact, particularly on the independent retail trade,” Reeves told The Australian Financial Review.
“There hasn’t been a lot of innovation in that supply chain for a long time whereas in the broader retail and grocery space there has been a lot of innovation.
“[There is] a chance for a new technology platform to create much lower cost and much greater competitiveness and hopefully make a contribution to the continued viability of the independent sector, which is critical for consumer choice.”
Metcash under pressure
While Metcash has established its own digital retailer-supplier portal, IndieDirect, it hasn’t been well-received by some retailers.
The company has also lost its Drakes Supermarkets contract in South Australia, with Drakes Supermarkets planning to build its own distribution centre.
Metcash shares fell 18% on Monday following the news and a further 1.5% on Tuesday.
Citigroup analyst Bryan Raymond told the AFR Drakes may not be the only chain to reassess their contract, with independent retailers under pressure from Aldi and the major supermarket chains attempt to reduce supply chain costs.
Raymond said the impact of losing the Drakes contract – which is worth about $270 million in sales and $16 million in earnings (EBIT) – was manageable for Metcash “as long as this is an isolated situation.”
“The risk is high however that the Drakes agreement could be the first of several major contracts which could be lost or renegotiated with a significant deterioration in terms,” he said.
