The century-old wool selling system is set to be digitally disrupted with Australian Wool Innovation splashing $3.6 million to build and launch an online wool exchange platform.
On the back of the industry's Wool Exchange Portal working group advice, an online portal for wool will be built within two years, with hopes it will be cheaper and more transparent than the open cry auction.
The public reporting of service and broker fees is expected to return a total of $38 million across the first 15 years of operating, equating to national savings of about $1.50 a bale.
The new online WEP will feature a search engine of selling options based on a grower’s wool specifications, with web links to private treaty, forward trading and AuctionsPlus’ Wooltrade, as well as an “eBay style” bulletin board for buying and selling.
WEP working group chairman Will Wilson said 15pc of Australian woolgrowers were expected to use the WEP, with potential savings of up to $27/bale in grower costs from the wool shed to the ship’s rail.
“For example, if you use the online bulletin board to transact, that will be a lower cost avenue to sell wool than the existent open cry auction,” Mr Wilson said.
Of the potential $27/bale saving, $19 is expected to come from more competitive pricing of service and broker fees.
“There is a large variation that is currently provided, between $10 to $66 (/bale), of broker fees and other ancillary charges for intermediary,” he said.
“By making them more transparent, people who are using the WEP will demand lower costs.
“The broker is still involved but our view is that there is a great deal of diversity with what growers pay brokers, and our feeling is that we can standardise those costs by providing greater transparency.”
Mr Wilson said the portal would cost $860,000 to operate annually and would be managed by a not-for-profit offshoot company of AWI.
Growers and broker users will be charged an annual subscription fee of $150, which will be waved in the first two years, as well as a $2.50 transaction fee, paid by both the buyer and seller.
In the past 20 years, auctions have declined from 13 selling centres to three – Sydney, Melbourne and Fremantle.
Mr Wilson said the portal was designed to help centralise wool selling in a virtual space and could include live streaming of the open cry auction.
“It makes those innovations more cost-effective because you know you’ll have access to (details of) up to 45,000 woolgrowers,” he said.
“The WEP is the delivery mechanism which we hope will encourage innovation elsewhere.”
The business case is based on an estimated 15 per cent of Australian woolgrowers using the portal.
While woolgrowers can use the portal to sell directly to exporter, processing mill or brand, Mr Wilson said financing, credit and quality guarantees would still be provided by exporters.
“In this whole process we have not talked about changing the regime of financing,” he said.
“The existing regime of both testing, sale by sample, and financing is enshrined in all the transactions the WEP refers to.”
The top target
The portal will include a national woolgrower directory, which will include contact details and digital photography of properties.
Mr Wilson said a WEP feature included a data repository so woolgrowers could access current and historical price and testing data.
“We keep getting messages from both Australian Wool Exchange (AWEX) and Australian Wool Testing Authority (AWTA) that growers can access this already, but it is difficult to,” he said.
“(AWEX and AWTA) haven’t signed on the dotted line but they understand this is something woolgrowers want. There are more negotiations that will need to take place.”
Mr Wilson said tutorials would explain the portal.
“The technology is not going to be the difficult part of this project, it is the change management piece - delivering the product to woolgrowers and assisting them in adopting it through education and promotion,” he said. The current system of selling wool cost an estimated $300m last financial year, or about $190 for each bale.
“Given the details of the build are unsure at this stage, an accurate estimate cannot be made but it will cost $3 million minimum (to develop),” AWI chief executive Stuart McCullough said. “Given it currently costs over $300m annually to sell the national clip, I think this is good value.”
The fine print
AWEX chief executive Mark Grave said no detail about the sharing of data had been shared with the market administrator.
“We have been waiting to hear the deliberations of the AWI board – we assumed it was going to be supportive of the WEP proceeding,” Mr Grave said.
“We haven’t seen details but it is building on already available technology.”
AWTA general manager Ian Ashman said the testing authority was waiting on the release of the final proposal.
“Currently the broker pays us a fee on behalf of woolgrowers and we send the information back to them – if it needs to go another group it can happen now, it is not a big deal,” Mr Ashman said.
“We’re keen to see exactly what the final proposal looks like but we are happy to get involved.”