While the technology was up to the challenge and the business case could be proven, bad timing, market resistance meant supply chain and order management system Southfresh had too few committed customers to continue, says former CEO Toby Warren, pictured right.

In hindsight he would have pulled the plug on the high profile e-commerce portal much earlier to prevent 50 per cent investor Endeavor Ventures from keeping things afloat when it was clear the short-term future was rocky.

The decision was made last month after three years of trading with the new million dollar in-house developed Varenti software.  "We believe the e-commerce application we developed had greater value than the fish business and there's no reason conceptually why those businesses couldn't have benefited through a substantial increase in efficiency," says Mr Warren.

The portal initially focused on selling fresh fish into supermarkets and branched out into nurseries, flowers and automotive parts. It was used by Foodstuffs Wellington to buy seafood for their 67 New World and Pak N Save stores and Mitre 10 and Palmers, were using it as part of their procurement or purchasing infrastructure. Southfresh charged customers either a 2.5 per cent fee per transaction or a monthly subscription of $2000 to $4000.

The technology operated continuously for two and a half years without fault and went through several major revisions to ensure it met customer needs but in the end suppliers were not committed.

Mr Warren believes the system was launched too early and could have been highly profitable in three years time. "We gave it our best. We had great people and technology but timing is everything - for us timing was crap."

He believes there were no compelling reasons for people to adopt on-line ways of doing business. "Enough people showed interest, those who crossed the chasm thought it was a fabulous way of doing business but getting people to cross that gap was difficult," says Mr Warren.

"It's hard to explain to people who are just learning to walk what it feels like to run races in the Olympics," he says.

Mr Warren believes there is a lack of understanding about e-commerce and the effectiveness of current business processes generally. The company often faced resistance with some suppliers insisting salespeople in the field or telesales teams were more effective than e-commerce approaches.

 "Change is a difficult thing on a good day and e-commerce per se isn't compelling enough. It challenges old ways of doing things that people are very comfortable with, it challenges jobs, the hierarchy and the middle sales management role within companies. It's also hard to nail a specific and deliverable return on investment because the gains require change within and outside an organisation in the first place and its bloody hard to effect that change."

He says Southfresh continually battled the perception that it was just another person in the middle. "We fought hard to present ourselves as a software supplier rather than a virtual middleman."  However he suggests the same efficiencies might be achieved for example by proving to a company that it's much more cost effective to use a courier company than owning delivery vans.

He insists the problem wasn't with his technology, which could connect to most back-end systems. "Given time it'll become much easier for everyone. As more people have to re-enter fax and email data into their back-end systems there'll be a greater reason to automate, make sure computers talk to each other and understand what happens when you integrate the entire supply or demand chain."

"Companies are loathe to impose change of this nature internally let alone externally.  We had no difficulty explaining intellectually how suppliers could do this and what the returns might be, there was just simply no rush," says Mr Warren.

Southfresh had been offering some form of electronic communication with retail outlets for eight years and had been a profitable business when it began developing the new portal approach.

"We proved it was a good way of doing business but saw the fish business diminishing anyway - people were eating more at restaurants and buying less fish as it became more expensive. The most dramatic example is the Big Fresh Mt Wellington fresh fish cabinet which has been reduced from 12 feet long  to 4 foot long. You can be sure that chain retailers devote as much space to product as they're likely to sell," says Mr Warren.

He says the Verenti e-commerce technology has a number of strengths:

• It was in the public domain
• It was simple, robust and secure
• Configurable and changeable
• It emulated common business rules, practices and processes

The technology behind Southfresh is being made available to the highest bigger. A request for interest has surfaced several offers including from Foodstuffs Wellington.

Meanwhile Mr Warren argues 'robustly' that e-commerce is the way of the future and will continue to use the knowledge gained through establishing and running Southfresh in a consultancy role.

September 2002
By Keith Newman

Toby Warren