<B>Co. Tries Car Auction</B>
<I>Kroger Rings Up Savings Using Online Tool</I>
By Megan Hjermstad
As corporate travel buyers increasingly seek purchasing opportunities created by the Internet, some are beginning to host supplier-specific online auctions that aim to expedite processes and save money.
Cincinnati-based Kroger Co., the largest U.S. grocery retailer, in September conducted an online auction for the $2 million car rental portion of its $15 million T&E spend.
Kroger corporate travel department administrator Barbara Hornback said the idea for the car auction came from senior management. "Kroger has an interest in the company that did the auction, GlobalNetXchange, so senior management asked if I was interested in doing car rental on there," said Hornback. "I thought it was a good fit."
GlobalNetXchange, a global B2B online exchange serving the retail industry, is a joint venture of Sears, Roebuck and Co., Carrefour and Oracle, which hosts the network and provides its software for auctioning and reverse auctioning. The online exchange is one of many online auction sites, including much-hyped sites Ariba and Commerce One, and such travel-specific newcomers as Excambria.
These Internet venues are the vehicles that allow the bidding process to happen in real time. "Online auctions really are an online Web-enabled process. All it is, is a technological solution to a process that has been out there for a long time," said Bob Langsfeld, principal of Incline Village, Nev.-based Corporate Solutions Group, who has worked with Kroger, in addition to another client on car auctions. Langsfeld said that the auction is like what NBTA did with the hotel RFP in providing a consistent communication tool, made corporate specific, to allow more people to interact in a more efficient manner.
"More and more will be developed for the corporate travel environment, as it becomes more applicable," said Langsfeld. "It is something that has come of its time." GlobalNetXchange, which was used for both car auctions, was designed to handle all kinds of commodities, but the Web application allowed for customization for travel bids.
Langsfeld equated the proliferation of auctions to self-booking tools five years ago. "The buyer side is not really aware of the process. It is so new that they don't know about it, and demand isn't there yet. It really is something that is going to evolve," said Langsfeld.
Hewlett-Packard's Kevin Iwamoto, who used a similar method to conduct a car auction in May (BTN, Aug. 28), has spread some interest in the idea. Langsfeld is about to do a hotel auction with another client and has spoken to a number of other companies interested in going forward with similar initiatives.
"I don't seen any company it wouldn't work for unless they were way behind in technology," said Hornback. "A company that is ready for it is going to save money and time." The two-hour auction yielded Kroger 5 percent to 10 percent savings off car rental.
"It is in black and white on the screen for vendors to see if somebody is bidding lower," said Hornback. "This way, they saw I wasn't playing one against the other."
Two car vendors refused and three participated, from whom Kroger selected a primary and secondary supplier.
"It's going to be a big part of how travel is going to be purchased," said Hornback. "The big car rental companies have been through it two to three times, now we just need to get others onboard."
Suppliers still are reluctant to participate due mostly to fear of the unknown, but also of a process they see as more beneficial to the buy side. "It is an emerging process, and some suppliers don't want to play. It has to make sure companies are playing on a level field," said Langsfeld. "Some auction environments are not so equitable. We are trying to ensure both sides are equitable."
Hornback was leery of using the auction because car vendors would not be very supportive, but once they became involved they were more receptive to the idea. "As a courtesy, we did invite each of the vendors to come in, go over the site, and run through a practice test," said Hornback. "We wanted this to be a fair process where they could voice any concerns, but they didn't have any big questions."
Hornback did a lot of preparation ahead of time to make sure suppliers felt comfortable. Kroger sent out a formal RFP where suppliers could include service aspects that needed to be returned by the day of the auction, but Hornback said those aspects potentially could all be written into a contract and put online as well.
Kroger conducted the live auction in a room with tech people on hand to help it go smoothly and to field calls from vendors. Hornback said she was able to elicit tech support easily because her budget and headcount fall under the IS department and because she reports to the CIO, a structure that she recognized is unique.
Hornback said it was worth the time and effort to do the auction. "It was a big help to have the Corporate Solutions Group. This year they were the facilitators, since they've done it before. They were the main people involved, and the main contact for vendors," said Hornback. "Now that we've been through it, we'll be able to handle it next year on own."
Hornback would love to see an online auction make the hotel RFP process easier, but when she talked to several vendors, only a few were interested. Moreover, she said it would be more difficult to coordinate the process with more than 700 properties in the hotel directory.
Hornback, who last year did an RFP for travel management company service that resulted in selecting incumbent AAA Cincinnati, said she would have liked to do an auction for the agency RFP process.
Hornback said it would be too challenging to do an auction for air. Langsfeld agreed, saying more reluctance on the part of airlines is one of the reasons, but it is more due to the nature of the commodity. "Airline pricing and volume is much more complex," he said. "There are thousands of rules on air, and getting your hands around that is difficult.