Contact puts $2.5m into new on-line buying firm

By CHRIS BARTON

Local online procurement company e://volution E-Business has received a $2.5 million cash injection from Contact Energy which has taken a 30 per cent stake in the "new economy" startup.

Contact chief executive Paul Anthony described the investment an "extremely inexpensive outlay for potentially big rewards."

He said that as well as getting the benefits of "business to business" (B2B) online procurement for its own needs, Contact also got the opportunity to use its bulk-buying clout and expand into a web-based marketplace for its customers.

"We're not just looking to be an energy retailer for ever and a day," he said.

Initially Contact, which has been trialling e://volution for the past two months, will use the supply chain management system to handle everyday business purchases such as stationery, printing and office supplies worth about $500,000 a year.

But within five to six months, Mr Anthony said, Contact aimed to be offering online purchasing to its 65,000 small and medium-sized business customers - 70 to 75 per cent of which already had internet access. It would then expand the marketplace to include retail consumers.

Contact has 500,000 electricity and gas customers.

As part of the deal, Contact has secured the right in perpetuity to use the e://volution product for its own business - meaning it takes a share of the transaction revenue generated through its market site.

Mr Anthony said other bidders were also trying to get a stake in e://volution.

"We like these guys. They're the fastest growing B2B site in New Zealand. I think they were impressed with the pace at which we could absorb change and take on new business opportunities. You need that agility in this new economy."

E://volution was spun off as a separate company in September last year after printing and stationery company Norcross Group invested $1 million in its own e-procurement project.

Its shareholders are brothers Phillip and Henry Norcross and James Dale.

Managing director Henry Norcross said the capital means e://volution can step up its growth rate and consolidate its market lead. The company expects to increase staff from nine to 20 within a year, and is considering expanding into Australia. Mr Norcross said the cash would also be used to enhance its software, which is built on IBM's Websphere.

IBM also has a partnership with United States marketplace software developer Ariba.

Mr Norcross said e://volution was considering the benefits of pursuing the fast track upgrade path Ariba offered and expected to make a decision in the next few weeks.

E://volution has 40 clients, including Avis, DB Breweries, Sky TV, Ford and Southern Cross, as well as 20 suppliers including Corporate Express, Blue Star Business Supplies, Freightways and Cafe Express.

Mr Norcross estimates the portal has the potential to handle annual e-procurement worth $1 billion. Clear Communications has also been reselling e://volution e-procurement services since June as part of its Trading Point e-business offerings.

E://volution is part of a worldwide trend by companies to use internet trading hubs to cut costs by removing inventory, paperwork and delay from their supply chains and bring more suppliers into previously exclusive electronic networks.

Worldwide e-commerce exchanges are expected to handle sales worth more than $US2 trillion ($4.6 trillion) by 2004.