Friday Rant: Blurring the P2P, Reseller and Distribution Business Models From the Large to the Small

Earlier this week, I had the chance to get some background on and a demonstration of Golden Pacific Systems (GPS), a hybrid solution provider that really got me thinking. I can honestly say that GPS has found a creative business approach for a software company. In a nutshell, they deliver a procurement solution that addresses most, if not all, non-food procurement needs of restaurant franchise operators. From store opening kits to menus, banners, stationery, dishes, utensils, glasses, cooking equipment, uniforms, gift cards and promotional pieces – their GPnet solution can handle it all.

So far the above sounds like just about any decent P2P solution, with cataloged content, onboarded vendors, and users that are guided to content via access rights and location. Yet GPS have added vertical integration to the mix, where they reach as far upstream as they can to negotiate with vendors, procure at wholesale, and take title to products. They even warehouse them and fulfill orders as GPS' clients place their orders online in a familiar shopping cart-type procurement experience.

To those in the restaurant franchise business, particularly organizations with between 50-500 outlets (which is how GPS defines their sweet spot client size), managing non-food items like this is a big distraction. Missteps can cause not only inconvenience and business disruptions, but even create regulatory violations if the right disclaimers tied to each specific jurisdiction in which the franchise operates are not placed on menus and other materials.

In the case of the GPS business model, clients gain the benefit of a turnkey solution to a non-core procurement activity that is still essential to their business and brand building. It's an interesting challenge whether to define this as direct or indirect – since the products sold help define the customer experience, something they're consuming along with the food when they visit a restaurant. What is the price for all this convenience? Other than some initial implementation fees to tailor the solution to each client's specifics, the solution pays for itself as clients purchase their goods, and is primarily in the markup GPS adds to their wholesale input prices.

We'll look more closely at GPnet and GPS after I've done some more homework on them, including the standard reference discussions (this commentary is based on an initial hour-long chat). Despite the brevity, I've jumped to the conclusion that their soup-to-nuts approach to taking on an entire slice of procurement for fairly substantial businesses -- one of their clients is Baskin-Robbins -- is really quite different and worthy of drilling down farther on philosophically.

Granted, their approach is probably anathema to most companies with VC funding, or to those who otherwise try to attain the generous business valuation multipliers that accrue to pure software companies. But to those with a well-defined business category, and more of a lifestyle approach to their business, and more patient funding, this looks to be a great way to build a steady, successful business. GPS has been around since 1977 and online since 2000 so they are clearly doing something right.

There are other firms out there that blur the separations between wholesale and retail, warehousing, fulfillment, software and end-to-end support. Think of Grainger, Amazon, and DSSI -- to mention just a few names that seem to fit this label at all ends of the size spectrum. For companies with access to long-term money, or entrepreneurs that have already pulled off a successful software venture and can now self-fund, going in the direction that GPS has taken can be a fruitful way to build a great business. Moreover, companies that can build a differentiated offering with this model and also happen to be diverse in their ownership (e.g., women, minority, veteran) may become even more strategic to their customers based on the combination of value-added services tied to what can amount to quite substantial spend amounts. DSSI is a great example of this approach, another would be enrich IT .

- Thomas Kase

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