Comviatel – E-Business Case Study

Publication Date: June 2004

• Introduction
• Context and Favourable Conditions
• Development Phases
• Strategic Scope
• Key Success Factors
• Barriers to Adoption
• Creating Value
• Performance Measurements
• Future Prospects
• Implications for E-business Development
• Technical Notes on the Business

Introduction

Comviatel, a business-to-business (B2B) portal described as follows: (as displayed on its Web site: www.comviatel.com)

"Comviatel is gradually becoming the one-stop shopping centre for the agri-food industry, the supermarket where buyers buy and sellers sell...How? By being the place where buyers, producers, processors and distributors meet, get to know one another, and buy or sell together. Through e-channels that are quick, profitable, easy, safe and user-friendly. In the new economy, everyone needs to make use of new tools for efficiency and profitability. These tools have been created to help, and Comviatel is dedicated to serving all players in the agri-food industry.

Here, sellers have all the visibility they need to sell. In addition to seeing their products duly listed in this electronic marketplace, they can use the purchase order management software, communicate with buyers and conclude secure transactions. They heighten their visibility, save time and they sell! Buyers find the products they need, without having to surf the Internet. They can use our purchasing management software, communicate with producers and distributors, make secure purchases electronically, and they're doing so!"

Comviatel is synonymous with the use of telecommunications to place orders. The firm was founded by Denis Gagnon and is based in the Quebec City area. Today, nine shareholders own it. Though the company created a market allowing buyers and producers in the agri-food industry to complete transactions, it does not offer auctions as such. It sees itself firstly as a tool for dialogue among buyers and producers, even if everything is oriented toward the opportunity to trade. Comviatel uses its internal messaging system to distribute information letters or specific bulletins.

Context and Favourable Conditions

1. The number of calls and faxes needed to complete a transaction between producers and buyers in the agri-food sector has traditionally been very high, resulting in significant costs in terms of time and money. Producers often found it hard to reach buyers, and when they did, communication was often skewed in terms of price, quantities, formats and delivery times for the goods available.
   
   
2. Denis Gagnon worked for 17 years in the food distribution sector and is thoroughly familiar with it. He noticed the need to find a solution that would facilitate transactions between buyers and produces in the agri-food industry.
   
   
3. Right from the earliest days of the Comviatel project, many distributors gave him their backing. This made it easier to attract producers wanting to enter into deals with buyers.
   
   
4. The failure of EDI (Electronic Data Interchange) with respect to buyers has rendered the Comviatel project more appealing.
   
   
5. Government programs helped Mr. Gagnon launch the company. Tax credits of 40 percent and start up assistance (Canada Young Entrepreneurs Program) have given Comviatel momentum.
   
   
6. Functionally, Comviatel's e-business platform employs the same software as the Canadian banking system: the 128 byte SSL (Secure Socket Layer). No training is required to buy or sell online, nor to have a "kiosk" in the market.
   
   

Development Phases

1. A pilot project has demonstrated the advantages of using Comviatel. The pilot project succeeded in convincing a fair number of buyers and producers of the need for such an initiative.
   
   
2. Comviatel conducted focus groups among restaurant owners and distributors.
   
   
3. The company has integrated online databases obtained from industry distributors and producers.
   
   
4. An important phase in the development has been the design of a simple and user-friendly solution, intended for chefs and assistant chefs in restaurants. The development of this solution took the routine operating methods among these buyers into account.
   
   
5. Mr. Gagnon emphasized the amount of time that was invested in meeting with buyers and producers. Between 300 and 400 private and individual meetings were conducted at food shows.
   
   

Strategic Scope

1. Scope of Functionalities and Services

The firm offers mainly local products.

1. Price lists and precise information (e.g., format, inventory availability, delivery schedules) are crucial details for conducting transactions, and are all readily available in the databases on the Comviatel Web site.
   
   
2. Comviatel offers increased visibility for producers. Promotional costs are usually high among producers because it is difficult to know precisely at what point a promotion or sales approach will prove effective. Comviatel makes it possible to supply such information when buyers want it.
   
   
3. Comviatel facilitates the scheduling of orders and deliveries. Comviatel is, in essence, a procurement planning tool for buyers.
   
   
4. Comviatel lets sellers set the cost of goods quickly and efficiently.
   
   
5. Comviatel is equipped with a search engine that enables it to broaden its directory of buyers and producers while also cutting the relative costs of the search.
   
   

2. Market Scope

1. Comviatel establishes contact with the market for restaurant owners and distributors. The site lets agri-food sector producers and buyers join an extended community.
   
   
2. Comviatel makes use of a market differentiation strategy by offering an added service to buyers. However, this strategy does not correspond to a bona fide segmentation strategy. Prices quoted on the Comviatel site are the same as those posted in the traditional market.
   
   
3. Comviatel brings a structuring effect to the market by accelerating the awareness of specialization and differentiation among producers competing for buyers. In other words, the portal supplies more complete information than that which is available in the traditional market.
   
   

3. Geographic Scope

The firm serves mainly the Quebec City region and strives to strengthen its presence in other regions of Quebec. It is closely tied to existing networks established among producers and buyers in Quebec's agri-food industry.

4. Scope of Skills

The firm remains at the forefront in the development of the project. The work required the services of a subcontractor (a programming expert) for a period of six months. This subcontractor has become a shareholder in Comviatel.

Key Success Factors

1. One of the key success factors has been the ability to attract buyers, thus enabling Comviatel to interest producers. Comviatel's success in attracting producers rests with the participation of buyers who become members and advertise on the site.
   
   
2. Producers have found that joining Comviatel is more rewarding than owning their own Internet site. Buyers can't deal with large numbers of producers maintaining their own Web sites because their norms vary, along with their access codes and modes of operation.
   
   

Barriers to Adoption

The main barriers to adoption include situational and structural factors. Situational factors include:

1. People are more cautious in adopting new information technologies in light of the negative impacts anticipated at the turn of the new millennium. These pessimistic outlooks have made it more difficult to develop an interactive market for producers and buyers.
   
   
2. The ill-fated events of September 11th, 2001 produced a considerable slowdown in the adoption of Comviatel by buyers and producers.
   
   
3. The decline in the use of new technologies by firms in this sector made investors and prospective users in this sector nervous.
   
   

The structural factors included the following:

1. Buyers of agri-food products prefer a touch and feel approach and personal contact with producers. Comviatel's founders had to work diligently at improving awareness to counter widespread scepticism among buyers. It is presented as a service that complements the mode of operation in traditional distribution networks.
   
   
2. Markets for buyers, and to a lesser extent for producers, are largely structured, in which volumes are considerable, but in which little opportunity remains for growth among traditional distribution networks. It has proven more difficult to convince established buyers and producers in the agri-food industry to engage in e-business than it has been to convince newcomers to the sector.
   
   
3. Comviatel cannot replace the relationship of trust that is usually created among buyers and producers during traditional transactions. Even though Comviatel enjoys a certain amount of credibility within the agri-food community, it cannot duplicate this level of trust.
   
   

Creating Value

Comviatel is a technological solution that creates value on a number of fronts.

1. Anonymity

Comviatel breaks new ground by creating an anonymous virtual market, where it is possible to carry out transactions without knowing the number of users. Neither the buyer nor the seller knows how many competitors are present on the portal. On the other hand, buyers know the sellers, who in turn have access to the portal's community of buyers.

2. Complementarity

Comviatel makes it possible to achieve significant widespread results and rounds out the conventional telephone and fax order network. This electronic initiative facilitates transactions, firstly by standardizing the price of products and then, by standardizing technical aspects of orders for products. Comviatel gives buyers a secure and trustworthy way to obtain information so that they are able to carry out transactions quickly.

3. Retention

Comviatel records recurring transactions among buyers and sellers. It sets out first and foremost to retain transactions occurring at fixed and regular intervals, rather than single transactions or "one shot deals," though one never knows, technology advances so swiftly.

Performance Measurements

1. Comviatel is the main initiative of its type in Quebec and the only one in operation. It is one of the most important in Canada, designed for restaurant owners and independent distributors.
   
   
2. Comviatel was launched six months ago and expects to cover its operating costs within a period of 18 to 24 months.
   
   
3. Comviatel has had 16 400 visits in six months, but cannot disclose sales figures for strategic development reasons.
   
   

Future Prospects

1. Despite its actual success, Comviatel must corner market share that will allow it to achieve a critical mass in order to attain a minimal threshold of efficiency. Comviatel seeks to benefit from economies of scale on the network level, by having a critical mass of buyers that will attract a critical mass of producers.
   
   
2. Comviatel works continuously to attain this critical mass in various regions of Quebec before considering doing business in Ontario.
   
   

Implications for E-business Development

1. The credibility of the player and its reputation in the industry are basic elements that greatly facilitate the introduction of new technological solutions.
   
   
2. A clear and articulated vision and the cooperation of competent partners are the keys to success in developing electronic business.
   
   
3. Given that the food market structured and mature, a complementary technological solution that is based on knowledge of the industry, and especially respect for its traditional operating methods, has a much greater chance of success than the introduction of radically new parameters.
   
   
4. Tenacity and patience are important assets in pursuing the start-up of such a project.
   
   

Published in Partnership

This case study was prepared by CEFRIO as part of the project
"New E-business Models and SME Development", a project undertaken in cooperation with Industry Canada, the National Bank of Canada, TELUS, CANARIE and Canadian Heritage.

The research team included Mrs. Louise Côté, Professor from HEC Montréal, Mr. Vincent Sabourin, Professor from the Université du Québec à Montréal, and Mr. Michel Vézina, Professor from HEC Montréal. The research team completed this case study at the end of January 2004. The opinions expressed in this case study do not necessarily reflect those of Industry Canada and/or Canadian Heritage.

For more information, please go to the CEFRIO Web site — The Authority on Information Technology Appropriation — at:  www.cefrio.qc.ca/english/indexAccueil.cfm.