Hey George, I've thought about this too. I appreciate you putting more eloquent words to it than I have been able to.
The coordination overhead is definitely real. We were smaller than your 17k doors, but had separate logins to: KeHE, UNFI, each individual retailer site (Walmart, Kroger, Whole Foods, Target, CVS and many more smaller chains), SPINS data, WERCsmart, IX-One global, Bazaarvoice and more. Working with each of these tools was like working with software from the early 2000s, and was a full time job for at least one person. Not to mention each one decides to email you nonstop, and you have to sort through figuring out which emails matter and which ones are irrelevant to you.
I do think AI is at a place now where a lot of the admin overhead of running across all these portals can be reduced, especially if we keep pressure on them to open up their APIs. But to your point, there's got to be a better way overall.
My hunch is that the solution lies in figuring out what value each player in the chain provides to the retailer.
e.g. what value does the distributor offer to the retailer? Fewer trucks unloading at the docks each day? More reliable inventory supply because you know the distributor will keep a nearby warehouse in stock, so it's easier for you to do the same? Is there more to it than that? How can DTP help solve some of those problems for the retailer?
If you can go through the chain and figure out the value add to the end retailer for each one and building around that I think that's where you can start really chipping away at the status quo (while also improving it for the little guys - us!)
Good questions. I think the ultimate values to the retailer will be:
1. Better prices - The new norm would be much less extraction and more transparency all around. This SHOULD reduce pricing for the retailer and pricing at the shelf compared to the alternatives.
2. Better in-stocks - If the retailer, distributor, manufacturer, and manufacturer's upstream suppliers are all on the same *protocol* then demand can finally happen in real-time. Right now everyone owns their own demand system. So demand and forecasting is a gated piece of software. Every company in the chain is having to navigate 18 different systems to figure out how much they should make and how much they should order. And when any one player needs financing for activities, that's a completely different system as well. The most modern thing that's happening right now is that you can connect systems via API. That's sluggish and unreliable even in best-case scenarios. Having information at the *protocol* layer completely removes the burden of translation. That also removes cost because there's plenty of money getting made on connection and translation.
3. Access to more products, in real time - It's right there in the name: *Direct* Trade Protocol. If a retailer wants a new product they've seen or wants to search a new category, they would visit a marketplace built on top of DTP. Right now we have to go through all of the hassle of setting up distribution and trade planning just to try out new items. DTP would show you what's available and modern category management would be able to utilize that. Category management is a whole other topic but, suffice it to say, the annual review cycles we're on now are going away. Brands and retailers that don't already see that coming are toast.
I like all of these things. Have you thought much about what the "wedge" use case would be to get brands signed up?
I wonder if you position against Faire directly, who currently charge 15% on reorders, 25% on first time orders. Feels like a nice chunk of margin there to go for, albeit not nearly the volume you want to get to. But you're removing a middleman who never touches inventory, so could be a good wedge point.
The initial use case would be to put a platform on top of DTP that would make it super simple for small brands, small distributors, and small retailers to work together. Co-op grocery gets hosed by UNFI, and so do the brands that do well at co-ops.
That being said, I just want to be clear that this isn't a product I'm selling, the same way HTTP isn't a product to buy and sell. It's a protocol layer that lets systems interchange data natively and lets companies OWN their data. Kind of like Bank of America doesn't own your credit score, that goes with you. You can build products that speak this language. SMTP is a good analogy as well. Once we all agree SMTP is the standard for email, I can build and sell you a reader (Outlook, Gmail, Apple Mail) but Apple doesn't *own* SMTP.
We would have to build a product on top of it or integrate it into existing products, but DTP itself is not something I would sign a brand up for.
Hi George, huge fan of everything you have built and of your substack. My two cents (from my economist perspective): the challenge is not what you are building, which is deeply needed, or the tech, which is almost trivial. The challenge is that what you are proposing is a two-sided marketplace (you have to bring in both supply and demand, so Facebook), and that is about one of the most difficult things to build, which is why we are all still on Facebook and linkedin, even though most people hate it, because the network effects are so strong. The problem in your idea is incentives, as in why would supply side (producers/manufacturers) have an incentive getting here when brokers do the search part for them? and then you have brokers and distributors who have an incentive in making sure this fails. And then you have demand side, which is fleeting because so many people enter the food industry full of passion but low in knowledge and run through their money faster than they can learn what works and doesnt. So I think the problem to build this is not the tech, but figuring out how to align incentives for all players so that they help you build it themselves (self builds), ie the human side is the problem. To my knowledge Canadian Food Innovation Network has been trying to build this for a while, but usage is low.
Building it will be a *breeze* compared to selling and marketing it. If you put me in a room for a weekend with some really great engineers and supply chain people, we could probably get v1 ready to test.
Then who will adopt it? It's not valuable until you build things on top of it and actually CONNECT BUSINESSES TO IT and use it to actually make money faster with less friction.
There are a LOT of people who are highly incentivized to leave these old legacy products but the switching cost is high and they need to be relatively certain that the thing they are switching TO will remain viable.
Today, for instance, you could probably get 90% of the way to rebuilding NetSuite by vibe-coding. And you could sell it to companies just for usage. You could probably decrease ERP cost by 99%.
But you need buy-in to get it going and keep it running.
My point is that, if we could build something that shaved 30% off the *cost* of serving the grocery industry, it's probably at least got a shot.
Hey George, I've thought about this too. I appreciate you putting more eloquent words to it than I have been able to.
The coordination overhead is definitely real. We were smaller than your 17k doors, but had separate logins to: KeHE, UNFI, each individual retailer site (Walmart, Kroger, Whole Foods, Target, CVS and many more smaller chains), SPINS data, WERCsmart, IX-One global, Bazaarvoice and more. Working with each of these tools was like working with software from the early 2000s, and was a full time job for at least one person. Not to mention each one decides to email you nonstop, and you have to sort through figuring out which emails matter and which ones are irrelevant to you.
I do think AI is at a place now where a lot of the admin overhead of running across all these portals can be reduced, especially if we keep pressure on them to open up their APIs. But to your point, there's got to be a better way overall.
My hunch is that the solution lies in figuring out what value each player in the chain provides to the retailer.
e.g. what value does the distributor offer to the retailer? Fewer trucks unloading at the docks each day? More reliable inventory supply because you know the distributor will keep a nearby warehouse in stock, so it's easier for you to do the same? Is there more to it than that? How can DTP help solve some of those problems for the retailer?
If you can go through the chain and figure out the value add to the end retailer for each one and building around that I think that's where you can start really chipping away at the status quo (while also improving it for the little guys - us!)
Good questions. I think the ultimate values to the retailer will be:
1. Better prices - The new norm would be much less extraction and more transparency all around. This SHOULD reduce pricing for the retailer and pricing at the shelf compared to the alternatives.
2. Better in-stocks - If the retailer, distributor, manufacturer, and manufacturer's upstream suppliers are all on the same *protocol* then demand can finally happen in real-time. Right now everyone owns their own demand system. So demand and forecasting is a gated piece of software. Every company in the chain is having to navigate 18 different systems to figure out how much they should make and how much they should order. And when any one player needs financing for activities, that's a completely different system as well. The most modern thing that's happening right now is that you can connect systems via API. That's sluggish and unreliable even in best-case scenarios. Having information at the *protocol* layer completely removes the burden of translation. That also removes cost because there's plenty of money getting made on connection and translation.
3. Access to more products, in real time - It's right there in the name: *Direct* Trade Protocol. If a retailer wants a new product they've seen or wants to search a new category, they would visit a marketplace built on top of DTP. Right now we have to go through all of the hassle of setting up distribution and trade planning just to try out new items. DTP would show you what's available and modern category management would be able to utilize that. Category management is a whole other topic but, suffice it to say, the annual review cycles we're on now are going away. Brands and retailers that don't already see that coming are toast.
I like all of these things. Have you thought much about what the "wedge" use case would be to get brands signed up?
I wonder if you position against Faire directly, who currently charge 15% on reorders, 25% on first time orders. Feels like a nice chunk of margin there to go for, albeit not nearly the volume you want to get to. But you're removing a middleman who never touches inventory, so could be a good wedge point.
The initial use case would be to put a platform on top of DTP that would make it super simple for small brands, small distributors, and small retailers to work together. Co-op grocery gets hosed by UNFI, and so do the brands that do well at co-ops.
That being said, I just want to be clear that this isn't a product I'm selling, the same way HTTP isn't a product to buy and sell. It's a protocol layer that lets systems interchange data natively and lets companies OWN their data. Kind of like Bank of America doesn't own your credit score, that goes with you. You can build products that speak this language. SMTP is a good analogy as well. Once we all agree SMTP is the standard for email, I can build and sell you a reader (Outlook, Gmail, Apple Mail) but Apple doesn't *own* SMTP.
We would have to build a product on top of it or integrate it into existing products, but DTP itself is not something I would sign a brand up for.
Hi George, huge fan of everything you have built and of your substack. My two cents (from my economist perspective): the challenge is not what you are building, which is deeply needed, or the tech, which is almost trivial. The challenge is that what you are proposing is a two-sided marketplace (you have to bring in both supply and demand, so Facebook), and that is about one of the most difficult things to build, which is why we are all still on Facebook and linkedin, even though most people hate it, because the network effects are so strong. The problem in your idea is incentives, as in why would supply side (producers/manufacturers) have an incentive getting here when brokers do the search part for them? and then you have brokers and distributors who have an incentive in making sure this fails. And then you have demand side, which is fleeting because so many people enter the food industry full of passion but low in knowledge and run through their money faster than they can learn what works and doesnt. So I think the problem to build this is not the tech, but figuring out how to align incentives for all players so that they help you build it themselves (self builds), ie the human side is the problem. To my knowledge Canadian Food Innovation Network has been trying to build this for a while, but usage is low.
I 100% soberly agree with everything you said.
Building it will be a *breeze* compared to selling and marketing it. If you put me in a room for a weekend with some really great engineers and supply chain people, we could probably get v1 ready to test.
Then who will adopt it? It's not valuable until you build things on top of it and actually CONNECT BUSINESSES TO IT and use it to actually make money faster with less friction.
There are a LOT of people who are highly incentivized to leave these old legacy products but the switching cost is high and they need to be relatively certain that the thing they are switching TO will remain viable.
Today, for instance, you could probably get 90% of the way to rebuilding NetSuite by vibe-coding. And you could sell it to companies just for usage. You could probably decrease ERP cost by 99%.
But you need buy-in to get it going and keep it running.
My point is that, if we could build something that shaved 30% off the *cost* of serving the grocery industry, it's probably at least got a shot.