The Fox, The Henhouse and the Fish (Why independence matters in your e-commerce platform)

One of the reasons maintaining trusted relationships is so important to the seafood industry is the many disreputable parties who find a way into the seafood supply chain, looking for ways to game the system. Whether it’s IUU fishing, mislabeling, failure to deliver product or failure to pay, these actors work to their advantage and to the detriment of other industry participants. But the chances to be gamed don’t stop at these obvious factors.

There are so many steps in the seafood supply chain, that it’s difficult to preserve margin at each step in the process. Anything that disrupts seller-buyer dynamics is a threat. We all use our relationships and history to know who our trusted buyers and sellers are, versus others who might step in ahead or behind us in the supply chain but not add value. But are there ways a predatory party could lurk in and around your transaction process, undetected?

An important consideration here becomes the independence of your e-commerce platform. When choosing a platform and marketplace for negotiating wholesale seafood transactions, it’s critical to look beyond what the platform offers and who the trading counterparties are, to also understand who is backing the platform itself. Is the platform backed by a broker or seafood company you compete with or transact with? If so, think about the kind of information about your business that company could have access to – who you do business with, what you have available to buy or sell, the prices you’re getting, and more.

Marketplace platforms which aren’t independent are a perfect case of the fox guarding the henhouse… or in this case, guarding your fish.

For the record – Dealboard is an electronic seafood marketplace independent of any broker or competing seafood companies. We do not take a position in any transaction.

As a stand-alone company not affiliated with any broker or competing seafood company, using Dealboard is a way to preserve your business model, your proprietary information, your trusted relationships and your margin.

When is a fish like a bond? (How unique, really, is the seafood industry… Part 2)

In our last post, we concluded that the seafood industry had enough uniqueness that buying and selling seafood is not well served by the predominant industry-agnostic platforms, which among other things, spread information more widely than needed and compound issues associated with trust and relationships.

But, exactly how unique is the seafood industry? If it is truly one-of-a-kind, then addressing industry challenges will always be slow and expensive, since solutions must be bespoke one-offs, and the industry has only its own mistakes to learn from. If, on the other hand, the very characteristics of the seafood industry which render industry-agnostic platforms inappropriate happen to be shared by at least one other industry, then the seafood industry can benefit from lessons learned and successes achieved in that other industry.

We see useful similarities between wholesale seafood transactions and transactions in the securities markets. A fish doesn’t look like a bond, walk like a bond, or – fortunately – taste like a bond, but it might transact like a bond. Or sometimes like a stock. Or, other times, like a derivative.

How to Avoid Getting Gamed

In the stock markets, it doesn’t pay to spread information about your intentions to buy or sell too widely, especially if you have a large quantity to transact. In a world where the average trade size is a couple hundred shares, the company looking to sell a million shares has a tough job. Announcing an intent to sell that much will influence the supply/demand balance and make it impossible to get a good price. This applies to seafood too – rather than telling everyone what you have, it’s important to advertise only to those you have successfully transacted with before, and to advertise a small amount just to identify who’s interested, then go from there.

Know your Customer

In the stock market, one doesn’t need to know or care who is doing the buying or selling – every share is identical, and transactions are cleared through a central counterparty so it doesn’t matter who was on the other end of your transaction. But over-the-counter securities, particularly derivatives, don’t work that way. Like seafood transactions, they’re negotiated and arranged bilaterally and privately between two parties. Here also the securities industry provides “hints” on how to handle the situation – from rigorous customer due diligence and know-your-customer requirements, to risk hedging, credit insurance and other protections for both buyer and seller.

These and other techniques perfected in the securities markets can apply to seafood buying and selling – if the platform you’re using includes them. Generic platforms aren’t appropriate for buying and selling seafood, but when a fish is like a stock, a bond, or a derivative, then it pays to borrow from what’s been perfected elsewhere to benefit the seafood industry.

How unique, really, is the seafood industry? (Part 1)

When I’ve spoken at conference events in various locations around the world, I often receive a question about a topic which concerns the industry as a whole, but where the questioner is asking me to comment on the “uniquely X perspective” on a macro-level problem, where X is whatever city, state or country we’re in at that moment.

In many cases, there is a unique twist at a local level to what’s going on, and I’m happy to comment about the unique challenges a broader issue presents for a specific area.

But in other cases, macro-level issues of the world boil down to pretty much the same issues for local participants. For example, to the extent that the nation is dealing with inflation, and my home state of Massachusetts is dealing with inflation, then the dynamics for northeast Massachusetts vs. southeast Massachusetts, when it comes to inflation, aren’t necessarily all that unique. The issues are real, but the “unique” label is spurious.

This applies to different industries, too. At some fundamental level, lessons learned in one industry can be expressed in generic terms which apply directly to other industries. But at other levels, what works for one industry can’t be guaranteed to work in another. The trick is to detect when the “unique” label is valid and when it is spurious.

Today, let’s focus on e-commerce platforms. E-commerce serves a wide range of different industries. A number of really strong e-commerce platforms which are wildly successful across these different industries, for both retail and business-to-business transactions. Take a look at how Alibaba and Amazon Business are doing, for example.

But do these platforms address the unique needs of the seafood industry? As we speak with processors and wholesalers in the seafood industry who have tried platforms such as Alibaba, it’s clear the answer is no. Industry-agnostic platforms leave both buyers and sellers of seafood down in a few ways:

1. They spread information more widely than needed

When buying or selling in bulk, it’s important not to get “gamed” by sharing too much information with too many parties. This is one reason direct messaging technologies such as Skype, email and WhatsApp are so prevalent in the seafood industry. In a world where there are actors who do not intend to transact, but stalk e-commerce platforms to gather information, sharing too much puts you at a disadvantage and can lead you to get less than the best price for your transaction.

2. They compound issues associated with trust and relationships

We’ve written previously about the importance of knowing your counterparty, of building trust, and of maintaining relationships. On many e-commerce platforms, what you post is available to any buyer – whether you know them or not. It won’t help you manage and incentivize those with whom you have the closest trusted relationships, and to the extent you don’t know your buyer, you also don’t know your risk.

We’ve heard horror stories about both issues. So – while there’s a need for e-commerce in the seafood industry, it has enough uniqueness to demand an e-commerce platform which has been specifically tailored to the industry’s needs.

Has your firm tried industry-agnostic or seafood-specific platforms for buying or selling seafood? What has your experience been?

Check back after the holidays for a different take on this subject.

Seas, dinner plates, and everything in between: the certifiably complex state of traceability

Consumers want to buy seafood sourced through sustainable fishing practices. At least, they say they do when asked. As industry practitioners, we certainly want that, too. To position against sustainable fishing practices is like arguing with motherhood, baseball and apple pie.

There are many different and overlapping initiatives underway right now – all inspiring. The seafood industry is making great strides in sustainability and traceability, but it’s clear there is a lot more work to be done.

The current state of play is certification, where participants adopt practices to ensure sustainability according to documented standards and undergo audits and examinations in order to earn the right to advertise their product as processed per the standard. This is all well and good, and is a practice followed in other business domains too. It makes sense.

But, the certification game falls short of our industry’s aspirations, for two reasons –

1. We’re too good at it.

Certification is done with respect to a standard. In the seafood industry, there is no shortage of standards. And that’s the problem. In the words of a longtime friend, “I love standards, especially because there are so many of them." SeafoodSource offers an excellent guide to certifications and eco-labels. The fact that this guidebook – aimed at seafood industry insiders – fills 322 pages is indicative of the issue. We’re so good at creating new standards that we’ve built a maze we can barely sort out ourselves, much less expect the consumer to understand.

2. The wrong fish still slip through

Certification is certainly a logical step – no issue there. But, certification often relies on attestations and audits. That leaves gaps, which data, systems and enforcement aren’t currently equipped to address. That’s not the same thing as a fully transparent supply chain from sea to plate, which is the real aspiration. Our industry is in need of an audit trail which spans all stages of production and processing, for each final product produced.

There’s no silver bullet – moving the needle on traceability requires problem-solving, development and evangelism across a wide range of stakeholders. We’re all going to need to pitch in, and to study paradigms which have been successfully adopted in other verticals.

How do you feel about your firm’s role in achieving sea-to-plate traceability?

Our supply chain forgot we’re supposed to be recovering from a pandemic

Quiz time: What do these three real-life scenarios from 2021 have in common?

1. This is a great time to be in the seafood industry. Seafood consumption is strong, powered by the continuation of the prepare-at-home trend triggered by the pandemic, and by post-pandemic resumption of restaurant and food-and-beverage business. And, depending on the sector, retail prices have soared, in some cases 50% - 60% within the calendar year and 140% year over year.

2. This is a terrible time to be in the seafood industry. If you produce, process or ship seafood, you’re struggling with labor shortages which make it challenging to deliver on your own commitments. And with ships sitting awaiting access to bottlenecked ports and continued challenges with closed borders, you’re concerned about the ability of your traditional suppliers to deliver on their commitments to you.

3. Completely unrelated to the pandemic, US Customs and Border Protection decided to take action to restrict a decade-old process used to ship whitefish from Alaska to the US east coast (if you’re not familiar with this one, it’s an entertaining look at how the lure of opportunity drives ingenuity… an excellent and informative podcast from Intrafish is here, which will enable you to see the humor and audacity in this video.)

Answer:

All of these scenarios place pressure on seafood companies to expand their global network of relationships. Our supply chain is still broken. It’s exhibiting the symptoms of a COVID long-hauler, where it’s far from recovered, and it is not clear how or when recovery will take place. There’s a distinct need to increase supply to meet demand, to increase the number of supplier sources in order to buffer the risk of supplier unpredictability, and to build in flexibility to shift from one source to another as the regulatory and geopolitical environment introduce constraints.

There is cause for optimism - while Delta variant flare-ups are still occurring, and the true impact of Omicron is, as of this writing, yet to be understood, in large part we’re on a path to recovery from the pandemic. Many of us in the US just had a real Thanksgiving gathering with family, something not possible a year ago. Companies are starting to return to the office. We’re eating in restaurants more now.

Competitiveness – and survival – requires conscious action to build new relationships, and platforms to effectively manage them and pursue new business opportunities. Companies who do so rapidly will capitalize on the market-driven demand opportunity, and will increase the flexibility and agility of their sourcing relationships to buffer supplier and labor uncertainties. Companies unable to do so will face idled facilities, margin pressure, and declining revenue. It’s that simple.

Are you able to ride the wave of change? How are you expanding your network of supplier/buyer relationships?

CONXEMAR Round-up Part 4: Seafood Industry Reality vs. Perception

Team Dealboard recently attended CONXEMAR, the International Fair of Frozen Seafood organized by the Spanish Association of Wholesalers, Importers, Processors and Exporters of Fisheries and Aquaculture Products. While there, we engaged in 120 conversations with representatives from over 100 companies in the seafood industry. We share our observations about the CONXEMAR event, the current state of the seafood industry, and the impact of COVID in this final entry of a multi-part series.

When we speak with friends who are not close to the seafood industry, they often ask, “it’s very old school, isn’t it?” That demands push-back. After over 100+ conversations with producers, processors, brokers and exporters who attended CONXEMAR, it’s clear that while this industry which thrives on tradition and relationships, it is certainly not old-school in its outlook.

The Dealboard team introduced a new concept in our conversations at CONXEMAR – that of an online platform dedicated to making it easier for buyers and sellers of seafood to find one another, communicate with one another, build trust in one another, and negotiate transactions.

An old school industry would be content with how these things are done today. An old school industry wouldn’t see value in making any changes. But an old school industry didn’t show up to CONXEMAR. Instead, the new concept was greeted with curiosity, openness, and – once the benefits became clear – enthusiasm. We engaged in joint brainstorming about the different ways sales reps, sales managers and others would benefit from the concept.

Old school? We can count on one hand the number of companies we spoke with who preferred that things remain as they are. This is an industry ready for change. One Spain-based importer and processor captured consensus well with her sudden realization: “this is the future.”

The seafood industry has weathered some direct hits through the pandemic and supply chain uncertainties. It has demonstrated its resilience, resourcefulness, and adaptability and grit. We’re seeing energy, forward-looking resolve, and enterprising creativity in our conversations.

There is an obvious disconnect between the current state of the industry and the outsider’s perception of it. Each of us in the industry has a hand in changing that perception, over time. Have you thought about practical steps you can take?

CONXEMAR Round-up Part 3: Who Do You Trust, and How?

Team Dealboard recently attended CONXEMAR, the International Fair of Frozen Seafood organized by the Spanish Association of Wholesalers, Importers, Processors and Exporters of Fisheries and Aquaculture Products. While there, we engaged in 120 conversations with representatives from over 100 companies in the seafood industry. We share our observations about the CONXEMAR event, the current state of the seafood industry, and the impact of COVID in this multi-part series.

Relationships matter. We do business with those who we’ve successfully done business with before. We build trust based on observing each other’s patterns of behavior. And if we’ve had an issue or dispute, we make note of those who strive to do right by others and honor “the spirit of the agreement” rather than those who ruthlessly work their advantage on the basis of a technicality. These concepts aren’t just for the seafood industry, they apply to life as a whole.

But, when it comes to relationships, the seafood industry has a scalability problem. We know that at the fringes of this industry, there are plenty of sketchy operations. Each of us every day faces decisions about whether to permit smaller companies to make big purchases, and from time to time every one of us finds ourselves in a disagreement over something which had previously been agreed. It’s no wonder many seafood buyer/seller relationships, the most successful ones, have been built and strengthened over generations.

But now, fisheries in some locations are threatened by climate change, forcing us to seek new suppliers in other regions. And, despite the generations-long history of many seafood trading relationships, the pandemic introduced unprecedented supply chain volatility and consumer demand uncertainty, leading many parties to exit the industry or seek shelter under bankruptcy proceedings.

All of this puts pressure on relationships, and forces all of us to seek new ones. Lack of trust becomes a huge barrier to growing your network. This was a frequent topic in our conversations at CONXEMAR. Any time a new party wants to purchase goods and services, developing trust over a generation is too long to wait for the necessary trust to develop.

There are ways to mitigate this, of course – word of mouth referrals, testing new parties through small transactions first, or obtaining credit insurance, for example. But each of these takes time, or gets expensive.

How do you build trust? Is your process to build trust a barrier or an enabler for your business growth?