As any good science student knows, a catalyst is an agent you add to speed up developments and, as such, is a word Colin Smith feels aptly sums up the effect Blueheath will have on the wholesale sector. The former Safeway chief executive is chairman of the fledgling on-line delivered wholesaler and is evangelical in singing its praises. "I genuinely believe Blueheath is the catalyst for a new relationship between suppliers and the independent retail sector, and it works," he claims. "Whether or not Blueheath is ultimately successful, I think that when the history books are written, we will be seen as a real catalyst for change in the way the independent retailer is serviced." Blueheath began life 18 months ago and allows small independent stores, with the help of a donated computer, to order a wide range of products on-line. They are then delivered direct to the door. Nothing radical on the surface perhaps, but where the company does get clever is in its business model ­ collating all the orders, ordering from suppliers and then picking those orders down rapidly so that they operate on a virtually stockless system. Local bakery operators' spare fleet capacity is then used to deliver the products (because the vans usually lie idle and empty after morning deliveries). All this adds up to an extremely low cost operation which, in turn, allows the company to offer competitive prices to its members. The concept has impressed the National Federation of Retail Newsagents, which has made the company its preferred wholesaler. Smith says he was approached to take on the chairman's role almost from the beginning by co-founders Douglas Gurr and Chris Philp and says he recognised the business as something radically different: "I was interested in doing something with what is called the new economy and I saw Blueheath as an opportunity to take a traditional process and completely re-engineer it, using the technology that was then becoming available, and by that I mean the internet." As well as retailers benefiting from cheap and convenient supplies, Smith says, the manufacturer too can claim a number of benefits, not least the ability to talk to retailers at the point where they are deciding what to stock. More importantly they can also feed back information on how successful a promotion or new product launch has been. Retailers too can benefit from impartial advice from Blueheath on issues such as what products they should stock. The company has also started producing its own branded point of sale material, highlighting bogof deals for customers to display in store, although Smith says they have no plans to introduce a Blueheath store fascia. The wholesale market is a competitive arena and the company already seems to have fallen victim to what Smith describes as low-level sniping. He claims there were also a number of attempts to kill them off at birth'. "Someone sent copies of our confidential supplier information pack to some, or all, of our competitors who then went to suppliers and said: Don't work with Blueheath.'" However, Smith says the plan backfired as Blueheath received calls from new suppliers wanting to do business. "You don't start a venture like this, which is so fundamentally different, without expecting a competitive response." But Smith points out that there are more than 80,000 independent retailers across the UK, with sales in the region of £23bn, leaving plenty of room for Blueheath in the market. But he adds Blueheath is ambitious: "We're very focused on what we're doing and beginning to build our share because, at the moment, we're still a small business." The company has signed more than 1,200 retailers and 800 more are waiting to come on board. As the customer base has grown, so has the range, and Blueheath has added fresh fruit and veg plus a range of cakes to its offer. But Smith says one of the biggest challenges facing them is getting the big suppliers to take them seriously. "We want to fully engage suppliers. When we started there was a period where they didn't listen and deliveries that were meant to arrive on Wednesday arrived on Thursday, which doesn't work with a stockless system. On one occasion a truck turned up at our head offices, instead of our distribution centre in Tamworth. I regard these as a lack of engagement in what our business is about," he says. However, he adds, the suppliers who have signed on quickly realise Blueheath has a lot to offer at very little cost. "Those who've got their mind round the distinctiveness issues see us as an exciting new channel of communication and something they want to be involved in, and, quite frankly, while we're still small in terms of our overall budget, it doesn't cost a row of beans to support us." n {{FEATURES }}

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