Does Someone You Never Ever Heard Of Hold The Keys To The E-Commerce Kingdom?
Written By: D. Geller
Published On: May 2000
Does Someone You Never Ever Heard Of Hold The Keys To The E-Commerce Kingdom?
GoCo-op began by providing purchasing services for the hotel and restaurant
industries. Working for most of the major hotel chains and dealing with
tens of thousands of individual suppliers they realized quite early that
the Internet was likely to be a major change driver and that they themselves
could use Internet technologies to bring their own business under control.
They launched what they believe to the very first industry specific portal
back in 1995, when most people couldn't even spell TCP/IP. They subsequently
began to build an internal system for managing their supplier catalogs.
Early into this project one of their large customers, the Renaissance
hotel chain, got a look at it and requested access. GoCo-op recognized
that it had struck ore.
company made a number of strategic decisions early on. One was to work
in total secrecy. They issued no press releases for four years - and in
fact swore the whole company to secrecy - until they had their first customer,
Papa John's restaurants, in 1999. So intense was their secrecy that when
the news of their major marketplace reached the trade press, it was reported
as the signing of a development agreement rather than as a completed business.
second decision was to recognize that their customers would find little
use in a solution that merely presented catalogs and enabled purchasing.
They knew that a full range of supply chain capabilities, including requisitions,
routing, and analytics, would be required. Finally, they formed a comprehensive
business vision that is beginning to come together as a powerful approach
within their own vertical and a possible challenge to better-known competitors.
The approach ties their product, Procura, with a vertical marketplace
and strong industry-specific partnerships and services.
GoCo-op is implementing a three-tiered approach to a vertical marketplace.
The top tier consists of the huge buyers, companies that purchase billions
of dollars each year, many if not all of which will be partners in the
venture. GoCo-op has announced the participation of Marriott International
Inc. (NYSE: MAR) and Hyatt Corporation. Not only will these two companies
do the bulk of their purchasing through the marketplace and participate
as partners, they are contributing expertise that is unparalleled in the
Marriott owns Marketplace by Marriott, a 150-person company that specializes
in purchasing food, supplies and operational goods. Marriott is contributing
this widely regarded purchasing operation to the new venture. It will
be complemented by Hyatt's 50-person operation that specializes in purchasing
related to construction activities. Marriott is also bringing its own
5000 suppliers to the new marketplace. Marriott can get preferential pricing
from its suppliers because, besides buying in huge quantities, it follows
well-defined procedures and payment schedules that simplify the transactions.
part of its participation in the marketplace Marriott has guaranteed to
its suppliers that it will police the other buyers in the marketplace
to ensure that they follow its own stringent procedures. This allows the
marketplace to offer to the mid-tier, companies that purchase between
$20 and $100 million worth of goods, the kinds of prices that Marriott
attracts. To persuade vendors to bring substantially the same prices to
even smaller companies, through a public portal that is part of the venture,
a modest markup will be applied and shared with the vendors.
The marketplace also has participation from Guest Supply, an intermediary
that sells to 19,000 hotel companies - over 68% of the hotel market. Although
Guest Supply is a participant in three different existing marketplaces,
they initially selected GoCo-op's technology as the basis of their own
solution. They have chosen, instead, to join this marketplace and carry
its message, together with on-site training, to their own customers. This
will be combined with a free PC program to ensure that the marketplace,
and the training to use it, will be in place in every possible hotel,
motel, nursing home or other participant in the hospitality industry.
Marriott alone has, in all its subsidiaries and operations, about 100,000
Both the private and public portals will contain a wide range of content
from industry trade magazines and value-added services from various kinds
of third party's, such as logistics specialists. This reflects GoCo-op's
strategy of offering a complete solution across the industry. They also
believe that suppliers will in the long run not put up with the need to
support different kinds of platforms. So, while there is no restriction
on suppliers participating in other marketplaces, the company believes
that the combination of its purchasing professionals, training and content
will make it the obvious first choice for sellers to reach the middle
and lower tiers.
GoCo-op built this system entirely by itself, using Microsoft tools and
Microsoft servers. Their solution is entirely server-based - no client
software besides a browser is needed. Since all of the system was built
in a single language and to a single vision, GoCo-op claims to have an
advantage over competitors that have accreted capabilities by merger.
For example, to bring the first hotel client, the Wyndham hotel chain,
online took 87 days from the signing of the contract. It took only six
weeks to develop a complete interface to Wyndham's SAP/S3 system, a feat
that earned GoCo-op a visit to Germany to discuss their approach with
GoCo-op's major competitor within this industry is PurchasePro. GoCo-op
believes that it has nearly precluded the entry of the more general MRO
marketplaces into this vertical market. They state that one major hotel
chain is abandoning a 1400 license agreement with one of the major pure-play
procurement vendors to adopt the GoCo-op solution, largely because this
chain felt after seeing GoCo-op's solution that there would be no participation
by other major hotel chains in the general market.
It's natural to ask where GoCo-op plans to go next? Although their solution
was built upon their specific knowledge of the hotel industry, they point
out that this industry is so complex as to structurally subsume almost
any other. They therefore believe that they can port their software and
their model of a content rich, multi-tier marketplace to other vertical
industries. Two that they mention as likely possibilities are Construction
and Government Purchasing.
has yet to validate its approach in two ways. First, it has to show that
it can leverage its huge start in the hotel industry to pull in the numbers
of middle and lower tier participants it is predicting. Second, it must
demonstrate that it can recreate its full model in industries where it
doesn't have years of prior experience and Rolodexes full of contacts.
If GoCo-op can do these two things it will become a major player in a
very short period of time, and could well steal a large amount of the
vertical business that other procurement companies have been counting
The IT executive who is looking into e-procurement, either as a market
maker or simply for internal implementation can draw a lesson or two from
this story. First, both general and vertical markets will proliferate
to such an extent that it doesn't seem that private e-procurement operations
- just us and our suppliers - will make sense for most companies. Second,
a company with significant purchasing leverage might think seriously about
the possibilities of becoming a market maker, and that if this seems like
a reasonable approach, a call to the folk at GoCo-op could prove to be
a wise way to drop a dime.