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This is The Modern Supply Chain, the show where we break down the modern supply chain strategies that help e-commerce brands shift from staying above water to predictably scaling.
Each episode, we’ll chat with industry experts who will help give you the tools and insights to take control of your supply chain.
Just smarter, faster ways to keep your business moving.
Aaron Alpeter (00:00):
Supply chain is more important now than it ever has been because used to be that people used to build a company that had a great growth story, but maybe the profit wasn't there or operationally it was a mess. Acquirers aren't interested in those companies anymore. That is a hard pass if you're not profitable or if it doesn't look at your scaling. And so you think about these brands that are going to market that are being acquired; they have well-run supply chains. They have profitable businesses.
Izzy Rosenzweig (00:27):
This is the modern supply chain, the show where we break down modern supply chain strategies that help e-commerce brands shift from staying above water to predictably scaling. Today we're joined by Aaron Alpeter, founder and CEO of Izba Group. Aaron has built a career being the calmest storm for some of the most recognizable high-growth brands in the world. Having worked at Unilever, Hubble Contacts, Lululemon, and the Flex Company, Aaron has a unique vantage point in how supply chains actually function. Through Izba, he helps brands move past the startup phase by building professionalized operations, finding competitive suppliers, and providing technology that protects margins. Today we're discussing how to treat your supply chain as a financial asset, the nuances of fractional leadership, and what it takes to maintain a healthy bottom line in this volatile global market. Aaron, thank you so much for being on the podcast.
Aaron Alpeter (01:15):
Izzy, thanks for having me.
Izzy Rosenzweig (01:16):
So before we jump into questions, can you give us a little bit of background? I mean, you worked at some of the most interesting companies. What made you want to start Izba? What was the inspiration behind it?
Aaron Alpeter (01:25):
Gosh, this is something I always tell people happened accidentally on purpose. I didn't really go out to decide that I wanted to do all these sorts of things, but I knew that I always wanted to work in supply chain. So that's why I started at school. I was lucky enough to work at Unilever in a rotational program where I got to do really cool different parts of supply chain, whether that be working in the Lipton Tea Factory for almost a year and a half to running import/export for North America. And at the time I knew that I wanted to be in e-commerce and Unilever is great at a lot of things, but they are more of a full pallets to Walmart type of company as opposed to e-commerce. And so I had networked my way in to the startup scene in New York City and basically just started to see that there was this opportunity over and over again where people were looking for supply chain help.
(02:11):
And I initially started out as a consultant and then went back and forth between full-time or staying as a consultant and just recognized that I could probably have the biggest impact on the most people by being a fractional resource for them.
Izzy Rosenzweig (02:24):
There's something about supply chain. I don't know if it's ... In DTC world, you almost have to be like an expert marketer, an expert branding, a storyteller. And usually I feel like the brands that do really well are really good at that. And supply chain is like this annoying part of the business. Is that why most of these brands just need help on the supply chain? What is your perspective there? Gosh,
Aaron Alpeter (02:45):
That's a great question. So I think that you have to look at where things were 10 years ago and where they are now. I think 10 years ago, the playbook was such that, yeah, raise a bunch of money, tell a good story, get some people to buy stuff, you ship it through the mail and you raise more money and you keep going with that. Founders used to make money off of secondaries. That was the goal that they went for.
Izzy Rosenzweig (03:05):
Paspers of the world and equivalent. Yeah.
Aaron Alpeter (03:07):
Exactly. Now fast forward to 2026 or post-pandemic, a lot of money has come out of the ecosystem. Interest rates are a lot higher and people are being much more intentional about how they are building these companies. And so I would say that supply chain is more important now than it ever has been because it used to be that people used to build a company that had a great growth story, but maybe the profit wasn't there or operationally it was a mess. Acquirers aren't interested in those companies anymore. That is a hard pass if you're not profitable or if it doesn't look like you're scaling. And so you think about these brands that are going to market that are being acquired, they have well run supply chains. They have profitable businesses. And so I think that kind of what we do now is more pertinent than it ever has been.
Izzy Rosenzweig (03:51):
So supply chain is sexy again. At Portland, we scream about it all the time. In order to run that efficient process, everything matters. Devils in the details, which trucking you're using, which factor you're using, negotiating those factories. So I think it's time again for, there's never been an easier time to start a business, but it's never been more important to run it profitably. Maybe you could talk to some of your first couple clients. Was there a common operational blind spot that you'd be like, "Ah, I'm seeing this once again." Any, I guess, method to the madness or common themes or businesses as you join, like classic example, this is an area they need to double down into.
Aaron Alpeter (04:28):
I would say probably the number one thing that we see with people who are kind of new to this space is around SNLP planning or IBP planning. So sales and operations planning or integrated business planning. And that's kind of a catchall because you don't have a good SOP process unless you're doing so many other things well. And it's more than just a meeting. It's more than just a spreadsheet. Really what it is, is the DNA of how a company makes decisions, deals with conflict and set goals. And so you think about this, if you've got two different companies, one that is extremely egalitarian and collaborative, they're going to make different decisions than a company that is very command and control and is like, "Hey, everything gets pushed up to the founder and then they execute and ego from there." And so much of this is not just understanding what they need to be doing, but understanding the right way for that company for how it's going to be applied.
Izzy Rosenzweig (05:21):
And do you see that apply to different size businesses or that consistent across the board? And I guess a follow-up, where do you usually get involved in? How early do you get involved in with the company?
Aaron Alpeter (05:31):
Yeah. So with each of the companies that we have is both Sourcify and slotted. They've all got slightly different ICPs. Sourcify is really good for pre-revenue up to call it $40 million in revenue and then call it $200 million and above. Izba is typically kind of that 10 million to 200 million range slotted to anybody with a warehouse. But generally speaking, we will engage with people who have raised some money, who have the idea, who are bringing things to market. And so we're pretty flexible that way. When it comes to just how you fit SOP into the different sizes and I guess maturity levels of a company, I would say it's the same problem but never the same solution. And so being able to look at this and understanding, okay, it's not going to do you any good to take a Fortune 500 level process and try to install that on a three-person company.That's just a waste of time, effort, money, and it's not going to have an impact.
(06:23):
But understanding the importance of comparing what you think is going to happen with what you want to have happen with what actually happened, that's a really important skill that you can do in Google Sheets or you can do in NetSuite.
Izzy Rosenzweig (06:35):
Got it. So let's say, again, we're back to this place in time which I fully agree with, call it DDC 2.0, which is profitability, not growth at all costs, profitability all costs. We talk about good SOP structure. Every brand wants to get more profitable. Do you find that while they want to, there's friction in getting it done like, "Hey, I want to get better at sourcing or get better at lowering my costs and raw materials." Is there a common friction spot where brands usually meet when they're trying to move towards profitability?
Aaron Alpeter (07:05):
Well, I think sometimes there's a tension between what they think their business is versus what it actually is. So there might be this though where like, "Hey, I want to be a really AI native beauty company and I'm going to invest in all this tech and do these really interesting things." In the day, "Hey, you're selling cosmetics, you're selling shampoo, let's just focus on those three things." And so it can be really difficult to not be distracted by the shiny objects out there and I'm guilty of this more than anybody and my team will tell you that, but really understanding, okay, this is what our customers actually are paying for. This is what's actually important and worthwhile. Those are the sorts of things that are really meaningful.
Izzy Rosenzweig (07:43):
Got it. Let's talk about, I guess the sourcing side of the business, getting the right manufacturer essential. So I guess two part question. When someone uses something like Sourcify or kind of looking for manufacturers, how many manufacturers should they be talking to? Is it all about price? Is there other sometimes worth paying a premium? How do you advise when it comes to the sourcing side of the business?
Aaron Alpeter (08:03):
I'll first define by what Sourceify is and isn't, then I can kind of answer the question directly. So Sourceify is not a directory, it's not Alibaba, it's not a giant list of factories you go through. Really what Sourceify is, is managed manufacturing. So we have a network of factories across 16 different countries, boots on the ground where we have these preexisting relationships. We know who these factories are, we know what they're good at, we know what they're not good at and we basically are able to kind of help people catch up and speed up that vetting out process. Generally when you're working with a factory, it's important to look at things on a lot of different factors. Cost is important, but it needs to be an appropriate cost that works for both the provider and for the brand. So for example, if the factory can't make money servicing your product, even if that's a really good deal for you right now, eventually they're going to say, "Hey, I don't want to do this.
(08:57):
It goes somewhere else or I'm not going to scale with you. " So your factory needs to be able to make a profit as well. And similar for you, you've got to be able to make prompt. So it has to fit inside your margin structure. But beyond that, there's all these sorts of questions about like, okay, well, where do you want them to be? Do you want them to be in Mexico? So it's relatively an easy time zone and easier language than say Chinese. Do you care about how much inventory you're going to have to hold or how quickly you're going to turn things? Do you care about their certifications? Are you going to be the biggest brand in their factory or in the smallest brand in the factory? And so there's really all of these elements that go into the capabilities aspect of it, but at the end of the day, you have to figure out, is it somebody you want to work with?
(09:34):
There are fantastic, very large manufacturers out there where it can take two months to get an NDA signed because they have to sign off by a bunch of people and like right, wrong or indifferent, that's something you're signing up for. And so do you want something where you can text the owner right away and they're like, "Oh yeah, we'll get these out tomorrow." Or do you want something that is a little bit more polished and above board and is going to have all this bureaucracy that kind of goes with these large companies? So there's just so many things that are there. And I think the key thing is that price is an important factor, but the most important thing you're sourcing is a relationship and you want to make sure that you're the right type of buyer and they're the right type of sellers that you can be successful and you're not having an us versus them mentality when it comes to sourcing.
Izzy Rosenzweig (10:17):
It's interesting. Bare often people think it's all about price, but really as long as you're dealing with a fair factory, you're going to be within a price range. So really it's all about, to your point, relationship. And is that really down to data? Are you really getting the data matching? Fully understand the scope of the product, fully understand the specs and then finding a factor that really fits within those specs, which is actually a hard job to do if you don't have someone like Socie. If you're on Alibaba, we do everything. No, no factory does everything. Are they really good at cotton? Are they really bad at cotton? Is it a data matching problem that you guys kind of work on Sourcify?
Aaron Alpeter (10:52):
It's interesting. There is a lot of data that's involved, but it's not strictly a data problem. It's also a human problem. And so I think that one of the things that we've done interesting is in the era of AI, we are embracing AI as quickly as we can. We're looking for all the different ways that we can automate and improve things and yet we still recognize that the future isn't going to be AI, the future is going to be you and I. And so the thought here is how do we make sure that human relationship, that understanding of what sorts of sports teams do you like or what sorts of things, how do I work with you or don't work with you? I mean, there's an element here where regardless of the size of your company that you work in, whether you're a Fortune 500 or a startup, you have to want to work with the people that you're working with.
(11:34):
And of course, cost and data and spec and quality, all of those things are so important, but at the end of the day, whether it's 5% of the decision or 50% of the decision, it's going to come down to, what's that personal relationship that I have with you? Do I trust you? Do I believe that we can work through the difficulties that are coming up together or do I feel like you're going to tread rip me off?
Izzy Rosenzweig (11:53):
When you jump into a company, how do you balance advising them on everyday firefighting? And I feel like I've spoken to some other people in really big companies. You'd be shocked big companies are firefighting every day. Who would know? So you're obviously firefighting every day with a customer, but at the same time, you got to implement some long-term strategic bets. How do you balance that with your customers that you advise for?
Aaron Alpeter (12:14):
It's a great question. I think a lot of this is we will try to separate those problems, at least in terms of our engagements. We are excellent firefighters. There aren't too many things that we haven't seen before, whether it be products being stolen, borders being shut down, factories or fulfillment centers going out of business, fraud. We've seen all sorts of stuff that's happened here and so we're pretty good at putting those fires out. However, we want to make sure that when we're brought on that either we are brought on to put out the fire or to prevent the fire. And if we need to do both, then we actually will compartmentalize it and have one person from the team who's putting out the fire and then the person who's doing a broader term fix. I think the reality is that you have to be able to understand the root causes of both and what those common threads are between them.
(12:57):
And so when we're coming in, we're trying to understand, okay, here's what the theory looks like. Well, any theory or strategy for what it could be won't hold if you don't have a good understanding of the culture, if you don't have a good understanding of why they are the way they are. And so the first thing we always do when we engage them is we want to just listen. And so our kickoff calls are typically a lot of us listening to them asking questions. We've got our note taker going on so we can go back and listen to a couple times, but we really just want to understand the context, the history, why were the decisions that you have today, the decisions that were made, what was true that may not be true now. Because believe it or not, people don't want to run crappy businesses.
(13:34):
They don't want to make mistakes, but yet the information that you have and the circumstance you had at the time, you may make that same mistake 10 out of 10. And really what we do with companies is we help them understand where they are in that lifecycle.
Izzy Rosenzweig (13:46):
And then I guess what is the trigger for someone to reach out to get help on we hit a brick wall, COVID, we can't get stuff over the border, tariffs. When does someone trigger to reach out to you guys? What's a common trigger that you guys see?
Aaron Alpeter (13:58):
I joke that we're really bad consultants because we give away a bunch of stuff for free. And so I'd say reach out more often than not because we believe that we should be able to tell everybody everything and the execution is the hard part. But generally where we want to be known for is the company that helps you with whatever comes next, whether that is launching your product, whether that is hiring your first COO, whether that's expanding into retail or a new geography or a new product category, whether it's raising money or working toward an exit. I mean, one of the things that we've become really fortunate with is we have been around and been involved in companies that have exited for lots of money. We've created about $2.5 billion worth of exits with the founders that we've worked with. And we've worked with some of them right after they did their first million dollars in revenue all the way through for a billion dollar acquisition, those coterie in December.
(14:48):
And so we have a really good understanding of what a supply chain should look like, smell like, taste like, feel like based on that life cycle. And so I think like one of the key things that we would always encourage people to do is you want to make sure that you understand exactly what you're trying to solve for. Because if you're working toward an exit, whether you're just starting out or you want to go through a transition in a year or so, you've got to understand what you're solving for and your supply chain needs to be fit for that purpose. If you start building out the redundancies and you harden your supply chain too early, well, you're not going to be able to prove out what you do, which is, "Hey, can this be profitable? Can it grow? Can I actually prove that this is a viable business?" Versus when you're looking to sell, they want to know, okay, everybody here who is about to make a lot of money, let's assume they're not there.
(15:30):
Is this business going to die with them? Do you have the right redundancies, the right processes in place to make sure that when I buy this company, I can plug it in versus trying to figure out how do I get as much data from you before you go on your yacht?
Izzy Rosenzweig (15:43):
Such an interesting conversation, because I think there's tons of businesses being worn every day with Shopify. Shopify just makes it so easy. So there's brands being born some brands are incredible, some brands have a harder time getting off the ground. Do you suggest brands when they start building a business like build it to sell? I don't care if you plan to sell or not, but we're not in the world of secondaries. You're either going to have cashflow or you're going to have an exit. When you talk to brands, is it up to the brand founder where you're like, "I don't care what your plan is, always built to sell because that is the healthiest way to run a business." How do you guys think about
Aaron Alpeter (16:15):
That? I don't know if it's necessarily built to sell, but it's more built to exit. So the reality is that everybody will exit their business at Sunday. They will either take a step back, they will get fired, they will quit, they will die, they'll be acquired. All these things will happen. Well, everybody will eventually exit their business. And so the main framework is look at optionality and you may decide that you want to build this and you want to hand it off to your kids as a legacy business. You may decide that you want to sell it after a couple years and sell it to a strategic. The good news about it is that 80% of that is common. You can run the business the exact same way for 80% of it. That last 20% just determines how aggressive you're going to be with cash and inventory and other things that you're doing.
(16:58):
And so I always encourage people to take a look at and say, "Okay, let's figure out what season we're in. Let's figure out what your short-term, long-term goals are right now and they're allowed to change. And then let's kind of work toward that. Let's make sure that you are making smart hires, that you are canonizing a lot of the gut feel that you have that's there and let's make sure that it's viable and can support the people. " There's nothing wrong with having a one person business either. I mean, I know several folks that are thrilled because they are making a couple million bucks in cashflow and they're just maintaining this drop ship or Shopify thing and that's an awesome outcome, but they're probably never going to sell that business because everything's in their head. And so you build that business very, very differently. You want it to be as lean as possible because every profit dollar that you spend on something else is your profit.
(17:41):
So you're going to be highly leveraged into automation, highly leveraged into you being the human in the loop. Whereas if you're looking at something that you want to step back on and whether you just want to collect dividend checks or you want to sell it, you've got to start building that team, that pipeline, those processes so that not just like when one person leaves, but other people, how do you make sure it's resilient is kind of the challenge that's there.
Izzy Rosenzweig (18:03):
You worked at Unilever and you saw the rinse acquisition. What do you think about that? That is incredible for the industry. I am just so excited for the industry, but you worked at Unilever, you saw the acquisition. What do you think about that? What are lessons there?
Aaron Alpeter (18:14):
Well, so it's interesting because we did a deep dive episode on eCommerce on tap, one of my podcasts. We went into grooms and we called it in November and said, "Look, these guys are going to be acquired by Unilever." I had to get money, that's what I was going to do. Because I know the leadership at the Health Collective. I know a lot of the folks that's there and they are very interested in companies that create categories. They aren't as interested in also ran things like this is a category defining company. So you think about Neutrofold created the new type of supplement idea for hair loss.That's a great acquisition. Liquid IV created another type of thing where it's basically Pedialyte and so they create a new category where they're selling Pedialyte to adults and it's doing well. Grooms fits that mold very well. And it's interesting because I was actually just working on an article for my newsletter where I'm going through and comparing Grooms and Allbirds, which are two deals that happened in the last two weeks and they were both acquired one for $1.2 billion, another one for $39 million.
Izzy Rosenzweig (19:12):
And that name was like OG, DDC. It's crazy to see that.
Aaron Alpeter (19:17):
It was a $4 billion valuation at its peak. And you look at this and it's really used to say like, oh, what happened here? But I think it's really interesting is like the playbook has changed from 2015 when Allbirds had started to call it 2023 when Grooms was started. It used to be that people made their money on secondaries. It used to be that the thought was, let's raise more money at a higher valuation, let's grow into it. Whereas today it's all about being extremely focused, doing a few things extremely well and just trying to grow that. And Brooms was able to do a lot of very difficult things in a short period of time and after three years, they have got over a billion dollar exit, which is amazing. It's awesome.
Izzy Rosenzweig (19:55):
And I think for DDC founders that see that, first of all, it's so exciting to see. But to your point that you said before is their exit, at least for Unilever was a little unique in the fact they're category creation. That's really difficult. Not every business is going to be categoration. If a brand is saying like, "Listen, I'm not on category. I'm in CPG, I'm selling, I don't know, cosmetics, whatever it is, but they still want an exit. What is the exit, at least from an acquisition perspective, market look up there? Is there a lot of acquisition opportunities or it's like, hey, if you have a healthy one, profitable business, someone will buy your business somewhere." Versus a Unilever is a little more unique. They're like, "Hey, you got to be really special."
Aaron Alpeter (20:31):
This is a great question. So I'll break it down into a couple pieces. The first one is I don't necessarily think you have to be a category creator, but you do have to be a category definer. So let's look at another deal, Lesser Evil was just acquired by Hershey's. Popcorn has been around for a while, but they defined the category in terms of what it was going to be and they were basically beaten the snot off of SkinnyPop, which is also owned by Hershey. And so there's a piece here where that was a $900 million acquisition from Hershey's. And so you look at these sorts of things and whether it's beauty, food and beverage, other CPG, if you have something that is defining, you're going to find these strategics that are looking at this and saying it's interesting. That's the first point. The second point is I would look at, say that these strategics are going through a big reshuffle themselves.
(21:15):
It used to be that the bigger the conglomerate, the better. The idea was that I'm going to be able to weather any economic cycle because maybe I've got food, I've got beauty, I've got personal care, I've got apparel, whatever's going on. And what you're saying is that these companies are becoming much more specialized, whether it is like Kellogg's splitting off Kellanova, which is their snacks and then Mars saying, "All right, we're going to take that snack business." Whether it's Unilever who sold their foods businesses to McCormick just last week or spinning off ice cream. Unilever's the number one ice cream company in the world by sales and volume. Now they've got an independent ice cream company that's out there called Magna. And so these large companies, I mean Puge is going to be acquired I think by Estee Lauder, if I remember correctly, or maybe it's Cody.
(22:00):
There's a big reshuffling in the strategic space in general. And so I think what that's going to do is it's going to make things a lot sharper.
Izzy Rosenzweig (22:06):
Why do you think that is? Why do you think they're reshuffling that? Are they seeing the creator economy? Are they seeing these little individual brands as they eating their lunch? Why are they doing that?
Aaron Alpeter (22:14):
I actually just wrote about this last week as well. A big part of it is that a lot of these companies became too big to grow where if I have deodorant and tea and mayonnaise and margarine all of my portfolio, those are all throwing cash off, they're profitable. But if I look at it straight from an ROI perspective, I want to put all of my money into the highest grossing, fastest growing, which is going to be deodorant. And so you look at a company like a Unilever Property Gamble, they typically take profits from really good businesses to other brands and basically milk them to go into higher growing pieces. And the interesting thing about a company, if you're doing 50 or $100 billion in top line revenue, it's really hard to get excited about innovation that's $20 million or your runaway success that, wow, we crossed $100 million.
(23:00):
All right, that's cool. And so I think you're seeing these things where whether it's activists, investors, whether it's people just slimming down and saying, all right, I'm going to split this up into smaller pieces so that I do get excited about the $100 million win. That's what I think you're seeing on that end.
Izzy Rosenzweig (23:14):
Another thing to talk about these emerging brands, let's call it Prime Energy drink, right? To them they had a litle bit what you said. They kind of started creating their own little area. Poppy obviously I think lives into that as well, but then there's also distribution. How important do you think someone like distribution as a creator to being able to sell your business? Or Gruden's example, no, just do paid acquisition, which leads to Amazon, which leads to wholesale. And as long as you have a great product and you define your product, distribution is great, it lowers CAC, but great product wins.
Aaron Alpeter (23:45):
I think the challenge that you run into if you're a creator and if you're building around yourself as a known creator, you're kind of locked in. You can't actually sell your business. Because you think about it, Kylie Cosmetics is not Kylie Cosmetics without Kylie Kardashian. She's just locked in and not great. She had a great exit and that was good there, but you look at like Road. That is a much better acquisition even though she's involved in all this sort of stuff because it's there. I think a great example of like the new playbook is Joyride, which is the candy company. They existed. They were doing well for a while and then they partnered with a YouTuber, Ryan Tran and basically he came on as their chief creative officer and has been creating all their content and doing all these sorts of things. And so he has his own following and does his own things, but now he's like tying it into Joyride and they've had meteoric rise, like the number one candy in the US now in just a couple of years and just this really robust growth that comes through here.
(24:43):
And so I think that it's important to tap into where people are, where those audiences are, but I think that there's probably a litle bit of fatigue which is the influencer idea and the influencer marketing pieces that are there. And so I think that it will be an important part that all brands consider, but I don't think it's a slam dunk to say, "Oh, I'll just get so- and-so celebrity to endorse these things." Look at how many celebrities have fragrance brands or have started fragrance brands. I have a list of like 80 celebrities that have had a signature fragrance at some point and that will get you some eyeballs and maybe some sales, but it's not a great way to build a long-term business.
Izzy Rosenzweig (25:16):
Really the magic is, I guess the foundation is a defining product, something that you're doing a new twist to the market. And if you add creator distribution, you're going to rocket ship it. You don't have it, that's fine. You do it a little slower, you do marketing, you get distribution, but a more defining product, a little bit of a twist to your industry is really the way to go from let's call it an acquisition play. It doesn't mean there's other plays, there's cashflow plays, there's private equity plays, there's other moves here, but that the foundation is a twisted product.
Aaron Alpeter (25:41):
I think that's right. And not to underscore, I mean, I think sometimes there's this perception that if I don't sell to a strategic for a billion dollars, I have failed. That is not the case. I think that there are lots and lots of really great businesses that are doing a couple million dollars in revenue that are profitable that are very desirable. People are always going to need people to mow their lawns. Think about how many lawn care services are started and that was my first job when I was a teenager. I think that you're going to find niches where having a good lifestyle business that is profitable and is working well and is niche is not a bad thing to do. And so I think one of the things that I hope this new vintage of startup ecosystem is teaching people is that you don't have to be a billion dollar exit to be successful as an entrepreneur.
(26:26):
You really just have to be a profitable business and enjoy what you're doing and be making an impact for your customers. And whether you are a $3 million business or a $300 million business, that's okay and you can be successful in both ways.
Izzy Rosenzweig (26:37):
If you just build on a foundation, healthy economics, build a profitable business, you have a ton of upside there. Last question we'll get into predictions. How do you se AI playing to e-commerce? I feel like AI is taking over coding. If your coding still, it's crazy. But how about for e-commerce? We've seen people talk about demand forecasting. I don't know. How have you guys seen AI play into e-comm?
Aaron Alpeter (26:59):
I think it's going to be a bit rocky before it gets better. And so I'll kind of just lay out how I see things. You see that there's this push by Shopify, by open AI, by pretty much every shopping cart out there to put the buying process directly into your agent into these sorts of things. And so in order to do that, Shopify wants to expose the inventory that you have, the product requirements, all those sorts of things. And on the surface, the idea sounds really good that you've got an AI agent that is going to say, "Hey, what is the right thing to go purchase and that goes happen?" I mean, this happened to us a couple months ago. We're remodeling our kitchen and my wife has been searching for a stove and I think three years ago she would have had 500 tabs open and would have talked to people and think out.
(27:46):
And this time she had two tabs open and one of them was Claude and she's like, "Hey, tell me what's out here. What do I need to look at?What's there?" And Claude was basically steering her away from some brands and steering her toward other brands and helping her triangulate on, do you want induction or gas or what's the right size and what do you need? And that was very helpful for her to ultimately get to a point where it's, okay, let's spend a couple thousand bucks and get this thing. I think in the future, the next step is going to be just, "Oh yeah, go ahead and order it for me. " And I think that what will be interesting about that is when that happens, it's going to be a winner takes most sort of mentality because ChatGPT or Claude are going to only recommend one or two things.
(28:24):
And if ChatGPC says, "Hey, I think that you should use this one that's the best one," you're probably going to purchase that one because it's smarter than you are, right? Well, I think what that happens is it's going to destroy the notion of a brand, you'll see some people have an enormous tailwind and they'll just kind of blow up and do really well and you'll have a lot of other people that will struggle and try to figure out the other ways to break through the noise. But I think eventually what's going to happen is that we are going to have a lot of sameness in what that recommendation is going to be. Another diversion here is so tech CEO was worried that we are creating these AI, which is basically gods without a soul. And so the idea behind angelic intelligence is that you've got I think 17 different virtues of what they call angels that basically help you make better decisions.
(29:11):
The best example I have is I have a friend of mine who runs a nonprofit in the supply chain space and basically what they do is they try to match up people who have products to donate with people who could use them. And so the example he shared was, "Hey, let's suppose I have Top Ramen that I want to donate." And there are two food banks that are interested and one of them says, "Hey, we're looking for Top Ramen because we want it for our afterschool program and the kids really like it. " And then there's another food bank that says, "Hey, we have empty shelves. We will take literally anything." In a traditional AI or keyword matching algorithm, you would look at that and say, "Okay, well, top robin, top robin, send it to the afterschool program because it's 100% match of exactly what they're looking for.
(29:49):
I've optimized for what's there." But when you look at it and you inject angelic intelligence into it, there's this idea that the greatest human need, even though it's not a great keyword match, is for the The empty shelf food bank. And so you get these ideas here where the question is like, right now ChatGPT and Cloud are optimizing for something, but what's optimized for you and what's optimized for me is different. And so I think where we'll go to is eventually this messy middle part where people will want to have custom agents that are unique to them that have their preferences. And it'll take some time for the industry and for the tooling to catch up. But having something that will help you do that shopping but already knows your size, whether things run big or small, the fact that you don't like these types of shoes or these types of things, that's ultimately where we want to get to, but we're going to have to go through some very messy areas in order to get to that outcome.
Izzy Rosenzweig (30:38):
It does feel like that. It feels like even though you could do a ton of stuff on Cloud and you could pump out stuff and in the last three, six months, we've seen it get a lot better. There's still AI slop happening from the code, the apps you could put out. On the flip note, it does feel like you're getting slowly. I think from you're saying a consumer, how you interact with Cloud or OpenAI from a shopping perspective or how business owners are building solutions. It does feel like it's around the corner, but it still feels a little sloppy as a noun. It'll take time to get there.
Aaron Alpeter (31:08):
AI slop is a real thing and you can se AI slop on social media or on a website and you're going to see AI slop in those shopping agents as well until people figure out how to tune them, how to build them and how to actually find value in them.
Izzy Rosenzweig (31:22):
Last question on a brand that is just getting started and they want to make sure to get as operationally efficient from the get- go. What is that one thing you would advise a brand to do in a tech stack, operating system? What does a key piece of advice to you to operate?
Aaron Alpeter (31:36):
Yeah, I think efficiency is, it can mean different things at the lifecycle stage. My advice to them would be to keep things as simple as possible. Pick up variable costs when you can versus fixed costs. Use consultants, use outsourced operations. Even if the margin may not be great to start with, the key thing that you're doing as a founder is you need to prove that you can build a product that people want and that they want to buy it. You do not need to squeeze out an extra couple points in margin right now. Again, you need to be profitable to think about all those sorts of things, but really what you're trying to do is you're trying to prove this thesis that people want to buy what you're selling. And that's the first thing. And so everything else that takes away from that, you should say, how do I outsource that?
(32:15):
How do I get rid of it? How do I automate it? How do I kick that can down the road so that I can focus on those other things? Because if I have to spend my time printing off labels and shipping orders out versus talking to a customer and giving feedback of what's there, I mean, entrepreneurs are going to work 80 hours a week anyways, but you still can't make more than 24 hours in a day and bodies still need to sleep and eat and shower and interact with people and all sorts of things. And so there is a finite amount of time despite what we tell ourselves as entrepreneurs. And so if you're just starting out, the key thing is make it as simple as possible, be able to explain everything, be willing to afford and to pay for other people to do things that you can't do or don't want to do, but also don't outsource that responsibility.
(32:58):
Make sure that whatever you bring on you hire, they are teaching you and that you're kind of upskilling yourself because that's really what you're paying for at that stage.
Izzy Rosenzweig (33:06):
At Poor List, we say the same thing. As much as you want to help everyone help with their supply chain in the first, I call it zero to a million dollars, you're really figuring out, do you have a good product? Do people want it and do I have a way to do distribution? Then you can start optimizing supply chain, efficiency, increased gross margin, increased cashflow. If you over optimize that too early, you're not focused on the main thing. Do you have a good product? Do people like it? So absolutely love that. Aaron, where could people find you? What can they learn more about all the services you offer?
Aaron Alpeter (33:34):
Yeah, I'm all over LinkedIn, so just Aaron Alpeter at LinkedIn, but you can also reach out to https://izba.co/start.
Izzy Rosenzweig (33:42):
Amazing. Aaron, thank you so much for being on the podcast.
Aaron Alpeter (33:44):
My pleasure. Thanks for having me.
Izzy Rosenzweig (33:49):
Thank you for listening to The Modern Supply Chain. If you have questions about anything we talked about, you can find me on LinkedIn. And if you're interested in learning more about Portless, check out our website, portless.com. As always, hit that follow button so you don't miss an episode. See you next time.