New Web Portal to Cut Some of the Guess Work

Los Angeles-based clothing designer Guess Inc. will announce today that it is creating a Web portal to communicate with suppliers and customers, becoming the latest firm to move business-to-business transactions online.

Guess, a maker of trendy sportswear, expects the move will lower costs and production time. In the U.S., Guess has more than 5,000 suppliers and 1,000 retail customers. The company said it eventually will make $250 million in purchases through the portal, which will become operational in March.

Guess said the move will save money by automating transactions now done by telephone and fax. It also will help the company broaden its base of suppliers by making it easier for them to do business with Guess. The company said it is prepared to subsidize the cost of moving suppliers and retailers online.

“If we can produce goods in a more efficient manner and get it out to our stores more quickly, there is no dollar value we can assign to that,” said Craig DeMerit, Guess’ director of technology.

Guess plans to open the site to the entire apparel industry in the second half of next year. By getting other manufacturers and their suppliers involved, Guess hopes to encourage price competition. Guess eventually could charge companies using the network a subscription fee to help defray the cost.

But it is unclear whether Guess, a relatively small player in the $177-billion U.S. retail apparel industry, can persuade competitors to go along. With the exception of General Motors Corp., most business-to-business Web portals have been set up by third parties. Guess had earnings of $25 million on sales of $472 million in 1998.

“There is a significant challenge to establish its independence and neutrality,” said Dan Garretson, senior analyst of business e-commerce at Forrester Research Inc. “They are going to have to work to convince the other players that this is for the industry and not just Guess.”

Apparel also faces unique difficulties in moving online. While some items that are ordered regularly, such as denim or white buttons, could be purchased over the Web rather easily, clothing manufacturers may be less willing to purchase more seasonal items sight unseen.

“Jeans that we sell day in, day out, or a hanger or a bag that is always available will be perfect for this,” said Bryan Timm, Guess’ chief information officer. “When it comes to fashion-focused items that we might buy only once, we’re still working on the business model to see if it makes sense.”

The business-to-business electronic-commerce industries have been growing much faster than online retailing, with Forrester pegging online wholesale revenues last year at $43 billion, while sales to consumers over the Web was less than $8 billion.

By 2003, Forrester expects the gap to widen, with business-to-business sales topping $1.3 trillion and online sales reaching $108 billion.

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Online ExplosionBusiness-to-business e-commerce in the United States is expected to increase more than tenfold between this year and 2003. Computer and electronic equipment firms will remain the largest category. Consumer goods account for less than 4% of the total.

Revenues, in billions: 2003*: $1.33 trillion

Source: Forrester Research Inc.