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American Express Plans Business, Consumer Buy Site
American Express is expected to launch a consumer
service that will give its cardholders access to American Express's own
negotiated rates for thousands of products.
Ephraim Schwartz, InfoWorld Tuesday, May
15, 2007 8:00 PM PDT
Code-named Purchasing Portal, American Express is expected to launch a
consumer service in the fourth quarter that will give American Express
cardholders access to American Express's own negotiated rates for thousands of
products that it buys annually. In addition, plans calls for a service that
will monitor consumer cellular phone bills and help recover funds when a
network provider makes a billing error or overcharges....
American Express spends approximately US$1 billion per year on MRO
(maintenance, repair, and operations) products. MRO typically includes
everything from furniture, electronics equipment, and computers to mops and
cleaning supplies. The new service will aggregate dozens of MRO shopping
catalogs from suppliers such as Staples, Best Buy, and Dell into a single
master shopping catalog. "Once you get a finite set of about 100 catalogs, you
have basically all the catalogs that exist," said Rion Needs, senior vice
president of global financial operations and business transformation at
American Express. The master catalog will be hosted by American Express and
will allow users to comparison shop but still buy directly from the various
vendors without having to "punch out" to individual catalog sites.
The idea behind Purchasing Portal stems from a little-noticed
announcement American Express made last week when it launched two new b-to-b
services, Contract Audit & Recovery and Catalog Pro, as part of its
Source-to-Settle suite of hosted applications. One industry analyst said that
these services could have far-reaching repercussions for b-to-b business,
retailing, and consumers. By passing on the value of American Express's
aggregate spending to the individual, it could dramatically increase the
amount of online spending, according to Josh Greenbaum, principal at
Enterprise Applications Consulting. "This could give consumers confidence that
they are getting the absolute best deal by shopping online rather than with a
big-box retailer."
Online retailers may also benefit if American Express is willing to
guarantee the validity of the card. At present, the merchant eats the whole
price of an online purchase if there is fraud. "If it is an unsigned deal, the
credit card company doesn't lose a penny." The service would also vastly
simplify the procurement process, especially for smaller businesses where
integration from the sell site to the numerous different procurement engines
companies use is always an issue.
The second service American Express announced last week for businesses
will also have a consumer component but one not planned for 2007. The Contract
Audit & Recovery service is an online service that automates the accounts
payable and purchase order process. The audit service monitors and manages all
purchasing aspects of a contract and identifies when pricing is at variance
with current pricing schedules based on the supplier-buyer contract. According
to a recent study by Aberdeen, 22 percent of all negotiated savings put into
contracts never come to fruition because of leakage between implementation and
payment process, said Needs.
The service will identify discrepancies and billing errors and will help
in the recovery from a supplier of any funds owed. If a client is large
enough, American Express will send along its own executives with the client to
the supplier site to broker a settlement, according to Needs. Needs said
American Express used its own system to save $55 million on $1 billion of
purchases made last year. The service is free, with American Express receiving
a percentage of the savings. According to Needs, Audit & Recovery is also
planned as a service to consumers, with Needs citing as an example the classic
problem with cellular phone bills. "That is one of the biggest opportunities,"
said Needs. Whenever there is a large transaction volume and complex pricing,
as in wireless, the consumer finds it hard to understand what all the numerous
fees are.
Take, for instance, a cellular phone bill. The service automates the
process by inputting all parts of an individual's or a business's cellular
service contract, matching those contract agreements against the monthly bill.
American Express has a reputation for high-touch customer relationships that
usually takes the side of the consumer over the vendor until it is proven
differently, said Greenbaum. If American Express uses the same business model
for consumers for its Audit & Recovery service that it uses for its corporate
customers, getting paid a percentage of recovered funds, then Contract Audit &
Recovery may turn out to be one of its most popular services to date.
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