Yesterday, I got someone kind of pissed off for telling them that their business is not indefensible. I think it's more of a wrong timing on my part and also a difference of perception of the same reality.
This person runs one of those boring businesses that supplies detergents to local vendors, he's somewhere at the tail end of the supply chain as he's not a manufacturer but has contacts with some that do and source his products from them.
He mentioned that his plan is to "take over" as the main supplier at his region and then expand nationwide to become the main supplier of detergents. This would then allow him to "own the market" and set his own pricing.
It sounds quite simple on paper, isn't it?
Barring a couple of hiccups here and there, the probability of achieving that is more than 50% provided he can secure reliable supply chains and competitive pricing.
Unlike luxury products, I don't think people are attached to the detergent brands that they use. There's little to no difference from one brand to another in terms of functionality.
However, having a branded product line can help in cementing the business's authority as the go-to supplier in the region.
This person has none of those on his radar, purely focused on sales and onboarding many vendors as possible to grow the network.
Maybe it's my creative brain that thinks this isn't sustainable long-term.
Arguably, you can't own a market without having some sense of authority beyond just being a middleman.
This in some ways makes the business less defensive than businesses with proprietary products, for example.
Speaking of defense, I told him it's hard to be indefensible as a business when you're standing somewhere between the local vendors and manufacturers, the latter is my main point of concern, in terms of them potentially cutting him out and going direct to vendors.
Well, that's where he got kind of pissed off at me, the main reason being that he felt I was undermining his business model and confidence.
Actually, I did learn later on that he had a conversation with one of the manufacturers prior to the conversation he had with me, which is probably why he was already feeling defensive about his position in the supply chain, i.e the wrong timing on my part.
He told me off that I don't understand what I'm saying, which seems true, as I'm not on the ground and nitty gritty of the business, maybe there are angles that I can't pinpoint because I didn't know that they exists.
I merely gave a bird's-eye view assessment based on theoretical vulnerabilities and for that, I probably came across as dismissive of his real-world experience.
Looking back, we were essentially viewing the same business through completely different lenses.
His perception was focused around established relationships, as in trust built over years coupled with logistical expertise and credit terms that vendors rely on, all the invisible infrastructure that makes his position more defensible than it appears on paper.
Meanwhile, I on the other hand was fixated on the structural vulnerability of being squeezed out by vertical integration, seeing him as just another layer that could be eliminated.
The truth is, both perspectives probably have some merit.
Yes, there are long-term strategic risks he should be thinking about, if he really wants to own the market sometime in the future but there are also immediate operational advantages that make his current position viable and potentially sustainable.
His frustration can be boiled down to me reducing his seemingly complex, relationship-driven business to a simple middleman model without acknowledging the nuances that make it work in practice.
When viewed that way, any argument against his business model just falls flat against the practical realities of how the business actually operates.
Timing is everything in these conversations. And perspectives can't be forced to align without first acknowledging what each person brings to the table.
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