ONE TOUGH APPLE

NEW YORK -- In his nondescript, third-floor Manhattan office, in a neighborhood just north of the notorious Hell's Kitchen, John Catsimatidis holds court each day as chairman, president and CEO of the Red Apple Group here.From this perch, Catsimatidis, a colorful character who seems like he might be just as comfortable in an old Edgar G. Robinson movie, runs 49 Gristede's Foods in the city and one

NEW YORK -- In his nondescript, third-floor Manhattan office, in a neighborhood just north of the notorious Hell's Kitchen, John Catsimatidis holds court each day as chairman, president and CEO of the Red Apple Group here.

From this perch, Catsimatidis, a colorful character who seems like he might be just as comfortable in an old Edgar G. Robinson movie, runs 49 Gristede's Foods in the city and one in Freeport, Bahamas.

For the uninitiated, Gristede's has been a part of the New York cityscape for 113 years. These are not big-box stores by any means. Most are small and cozy but handle enough of an assortment of goods to suffice an urban shoppers' weekly grocery needs.

If you are looking for high-tech, at first blush you would be hard-pressed to find it at Gristede's.

Ah, but look again.

Catsimatidis -- who is quick to point out that merchandising in the food business can be akin to good old-fashioned horse trading -- has, almost from its inception in July of last year, embraced a lesser-known electronic procurement exchange, Dexsi.com, based in Tampa, Fla.

"We got involved with Dexsi almost from the get-go," Catsimatidis said. "It's a reality check on prices for us."

Rob Newton, president and CEO of Dexsi, said that unlike the three major electronic food exchanges, Transora, WorldWide Retail Exchange and Global NetXchange, Dexsi, for the most part, sells overstocks and inventory excesses retailer-to-retailer on-line.

Users of Dexsi can buy or sell their excess inventories in two ways, by an auction -- or bidded version -- or on the spot market with fixed prices.

All prices listed on the exchange are called "landed" prices that include the cost of shipping and a commission for Dexsi. Newton said the price includes commission and a markup for logistics. There is no annual fee for membership in Dexsi.com.

Regardless, Catsimatdis said he thinks the service is worth it in what can be a dog-eat-dog business environment.

"It (Dexsi) has made smart buyers out of us," Catsimatidis said. "I am up to using it for about 5% of all the buying I do. I tend to use it for high volume stuff like raisin bran, corn flakes and tuna fish."

Over and above making his buyers smarter, Catsimatidis said that the new electronic procurement tool also makes them tougher.

"In retailing, you will either be the one that kicks or the one that gets kicked," he said.

Knowing what is out there inventory-wise and how low it can be purchased goes a long way to making for some smart and tough retailing, Catsimatidis said.

"Let's say we need to buy some macaroni and cheese and there is someone offering us a 'deal' at $31 a case in New York.

"If we go on Dexsi.com and see that it's available for $28 a case or even $27 a case, that then gives us a feel for how far we can take the manufacturer," he explained. "If the manufacturer doesn't want to 'play ball' with us we have some alternatives."

According to Newton, there a two ways a food retailer can use the Dexsi system.

The scaled-down version, for users who figure on using the system infrequently, can simply download the software from the Internet, register and obtain a password, and begin trading.

However, for more sophisticated usage that includes an inventory management feature, users must have a copy of Dexsi's intelliTrader software installed on their network.

By using the intelliTrader software, users get a much more customized version of the application featuring firewall protection for security purposes and inventory management that can alert users when stock in a particular item is low and needs to reordered.

The more advanced version can also be tailored to search for particular items of interest for a specific food retailer.

"We never realized it, but we purchase $10 million a year in high-volume items. By using Dexsi, I figure I can save at least 10%. That's $1 million a year, if not more," Catsimatidis said.

While the technology is new, Catsimatidis is of the opinion that while there is an advantage to having it, the retailer still must employ his old-fashioned, school-of-hard-knocks merchandising know-how to take full advantage of it.

"Really, this is a form of old-style Indian trading," he said. "Eventually, all of this technology all comes back to how much for the horse?"

Catsimatidis said that he has no plans to join any of the three major food exchanges (Transora, GNX or WWRE) that are getting more of the publicity right now.

"Right now, we are very happy with what we are doing," he said.

Newton said that Dexsi is experiencing very healthy growth and he sees the service easily peacefully coexisting with the major exchanges that feature a more direct supplier-to-retailer approach. He said that Dexsi might someday soon in fact partner with one of the major exchanges.

Newton said that since its inception almost one year ago, Dexsi has managed to capture one-third of the Top 50 retailers in the retail and wholesale grocery business.

"Our membership is well over 100 companies," Newton said. "Our growth has been steady and significant. We did $25 million in closed transactions in the first six months and in the first quarter of this year we have already done $26 million.

"We are also profitable," he added.

Dexsi features mostly center store-type items that are nonperishables. It has more than 70,000 stockkeeping units in its data base.

"We deal mostly with excess inventory of one retailer to another," Newton said. "We do have some manufacturer excesses, too. It's a win-win business model."

Catsimatidis agrees.

He said he doesn't want the Wal-Marts of the world to kick his backside, so by using electronic procurement tools like Dexsi, it's one way of staying ahead of the competition in this kick-or-be-kicked retailing world.