Event
Summary
PurchasePro.com,
Inc (Nasdaq: PPRO) and Office Depot, Inc (Nasdaq: ODP) announced a strategic
relationship to capture the purchasing dollars of corporate America's small
and mid-sized businesses. Under the terms of the arrangement, Office Depot will
be featured as the preferred provider on PurchasePro's business-to-business
marketplace, and Office Depot will mass market PurchasePro's software. In addition,
Office Depot, which already held 500,000 shares of PurchasePro, will make an
additional equity investment of up to 600,000 shares.
Market
Impact
This is not
simply about more business for Office Depot, as it might first appear. By joining
the PurchasePro network, businesses will be able to buy from and sell to any
other company belonging to the network. The network provides them with a venue
to advertise, bid, buy, sell and source. While many details remain to be worked
out, it is clear that buyers will interact with the marketplace from computers
or kiosks physically located within Office Depot stores. Besides providing a
valuable service to its customers, Office Depot will gain featured positioning
within the marketplace's web pages. Also, for customers accessing the marketplace
from Office Depot stores, Office Depot will be the only supplier of office goods
from which they can buy. A spokesperson from PurchasePro pointed out that one
of the benefits to Office Depot customers is that they will receive a single
report showing all of their purchases for the year (or for any smaller time
period).
With businesses
with fewer than 500 employees expected to account for two-thirds of Internet
business by 2003, PurchasePro has made an artful approach to a large segment
of this market. This move will bring more companies into E-procurement at an
earlier stage, as both buyers and sellers. It also has potential benefits for
Ariba (See TEC News Analysis Article: "Ariba
Reaches Out to the Little Guy" September 28th, 1999) which, because of its
own positioning within the PurchasePro network, may be the natural next step
for the companies which are brought to E-procurement through PurchasePro and
Office Depot but which grow to need more sophisticated services.
User
Recommendations
Larger organizations
that are interested in this market will definitely want to take a look at listing
in PurchasePro's marketplace, or Ariba's Network. It may be wise to wait until
the vendor details are announced, but the general guide is that those needing
to integrate their Internet sales activities with backend systems will gravitate
to Ariba and those with less complicated requirements will join PurchasePro
directly.