Wholesale challenger hits 300
After forming in late 2015 in the Melbourne suburb of Richmond and clinching a partnership with global logistics firm DHL in 2016, Irexchange has spent the best part of two years formulating a tech platform to service the independent retail food and liquor space.
The company has been trading since the start of this year, with its ‘open sourcing’ model offering independent retailers control over the range of products and services they stock through a portal.
According to CEO Clive Yoxall and CFO Andrew Maitland, the company is targeting both single store owners through to large multi-store-owned groups across its five state footprint, serviced by four distribution centres.
Rather than trying to take the likes of Coles and Woolworths head-on, the company has a focus on the independent names, which they believe can make a sizeable impact in the sector with localised offers seen as a point of differentiation against major chains.
“We genuinely believe that independent retailers who operate in their local communities can actually be a very strong competitor in this sector,” Maitland told IRW. “We’ve seen a lot of examples of independent retailers who increasingly buy their product direct in order to get the right range at the right price and the competitive proposition in the market.”
When asked if there’s anything wrong with the current wholesale model, Yoxall said many suppliers within the industry had lost trust with the incumbent wholesaling model, dominated by heavyweight firm Metcash.
“The important point is that the retailer doesn’t believe they’ve got a cost structure and an efficiency of going to market that’s going to help them grow and really prosper in the next five to 10 years. So that legacy old-school supply chain, with heavy overhead structure, is a wholesale model that worked in the 90s, maybe five years ago, but [it’s] certainly not going to work in the next five.”
Maitland said technology is eliminating the role of the intermediary between parties and in doing so, any added costs.
“In terms of, ‘Is there something wrong with the existing model?’ I think it’s more that intermediaries are disappearing because they represent a high cost structure and you have got to lower your cost in today’s retail trading environment,” he explained.
“We make our money by moving goods, we use the technology to do that in the lowest cost fashion possible and in many ways, we are stepping into a trend that’s been emerging over the last five to six years where retailers are increasingly getting a large share of their product direct from the supplier.”
Irexchange estimates approximately 40 per cent of retailers are direct sourcing with the figure growing every year.
Getting the supply chain right
Yoxall said working with a number of retailers in the UK during early 2016 to be “across all of the best practice models in the world” had helped the company optimise its technology and route to market for both retailers and suppliers, buoyed by the partnership with the world’s largest “FMCG logistics providers” in DHL, which service the likes of Tesco and Sainsbury’s.
“I don’t think it’s necessarily ground-breaking to put that sort of efficient network on the ground, particularly with a partner like DHL, which has 500-600,000sqm of floorspace, plus thousands and thousands of delivery points nationally,” he said.
“What’s missing is the technology to aggregate a fragmented market like the independent retailers through technology, so it’s not a closed loop like Coles, Woolies or Aldi.”
The company’s tech is cloud-based, which Maitland said was important to note because “most new technology startup companies businesses are recognising that the best way to get the greatest economics is you don’t have to do it all yourself”.
Looking ahead, Irexchange has set its sights on aggressive growth, potentially “doubling or tripling” the store count over the next six to 12 months, while signing more suppliers and growing the SKU range.
This article first appeared in our weekly magazine, Inside Retail Weekly.
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