Like me, Max Rhodes (Founder & CEO of Faire) questioned the existence of trade shows because this form of doing business is so antiquated. Trade show is a remedy for a system that is signaled by the unscalable nature of trust.

The problem they are tackling is to make B2B transactions between independent retailer and brands a lot more effective, capital-efficient, and with lower trust costs, all by moving digital.

Independent retailers face issues like 1) tie up cash in inventory that might not sell, 2) forced into MOQ, and 3) spend time traveling to trade shows to touch and feel product to reduce trust gap; while brands face challenges like 1) spending $$$ getting a booth and flying across the country / the world to build trust with their customers, 2) hiring independent sales rep, and 3) drowning in paperwork, silos system and fragmented data.

In short, retailers were dealing with inventory risk, cash pressure, and trust in brands, while brands deal with high CAC and back-office pain.

Classic chicken-and-egg problem, you got problems on both sides, and where do you start?

GTM Strategy

Max started with the demand side, trying to make the buying experience pain-free. They wanted to test retailer’s response if Faire removed the #1 retailer fear (getting stuck with inventory and tying up with capital pressure), will they be willing to source fully digitally, without going to trade show at all (and even interacting with a rep)? What would be needed for this to happen?

They realized, the activation energy was largely elevated by risk, and lack of trust (of not being able to see goods offline, getting the tangible touch and feel, and the networking & relationship building.

The early phase of GTM is super manual, and it happened before they wrote a line of code.

Max and the team literally walked into stores and sold the concept of no-risk wholesale buying, and got their first ~10 customers before software. This doesn’t require any web portal, just need to onboard a few suppliers (brands) and an Excel sheet of products. The goal is to test whether or not retailers will buy from new brands without needing to meet the brands in person at the trade show, if providing enough guardrails like BNPL, free shipping & return, etc.

That was a yes, and this model worked, and the rest is history.

Revenue Stream

The business model is charging 15% commission on marketplace orders, plus a one-time fee on first orders from a new customer; reorders stay at the standard commission

(Interestingly they charge nothing for retailers to buy from existing suppliers, this is under the service called “Faire Direct”, think of it as the ordering + terms/return infra. I see this as potential lead magnet for retailers).

Commission is actually quite high, but given that they provide logistics and underwriting, it makes sense. At least it makes more sense to me as a marketplace founder, but suppliers would complain thats too much.

Overcoming disintermediation

Another note I am interested is how they resolved the disintermediation problem, which is a classic challenge for marketplace companies.

The key is to make Faire the best place (aka the safest and most convenient place) to place orders, for buyers, of course. As long as you provide the infra and service to make the shopping experience delightful for demand side, you can aggregate a loyal group of buyers, then the suppliers will join the ecosystem albeit a hefty 15% commission rate. Buyers always have a stronger position and power dynamics vs sellers, that’s why you want to prioritize experience for the demand side.

(Yes you can contact the factory directly, but then they probably won’t do credit terms so you are still back at Faire for the net-60.)

Interestingly the brands want the buyers to order from Faire, I wonder if there’s any secret terms / contracts signed? Such as Faire as the exclusive channel, unlikely though.

https://www.reddit.com/r/smallbusiness/comments/17amp8u/has_anyone_buy_from_faire_wholesale/

Additional thoughts on supply side

Faire definitely added value to make B2B wholesale purchase more streamlined and more efficient. Kudos to the team for executing well. Though they made demand side happy and definitely added values to supply side via demand access, conversion unlock, operational simplification and risk transfer, I am unsure if they also made supply side 100% happy (it’s very hard)

I did come across some Reddit posts complaining about Faire is destroying their businesses, especially after platform grows, more suppliers join and build up competition. Then you need to pay for ads to be more visible. But even after paying for ads, you might still be hidden and be overshadowed by competitors that have dropped much more money than you do.

This is a dilemma, and it’s something that I am actively exploring and researching - whether or not agentic AI will change the commerce landscape and ads will be revolutionized.

https://www.reddit.com/r/smallbusiness/comments/1lq5mzw/faire_wholesale_destroying_the_industry/