The Importance and Power of Direct Exchange

Happy Tuesday Friends,

Everything we talk about at Going Direct - the creator economy, creator equity, new forms of direct distribution, improving human and planetary health, more transparent supply chains - all filters down to the concept of direct exchange. We constantly ask ourselves the following question: How can we increase the amount of direct exchange in our daily lives?

We believe direct exchange is a very powerful concept that:

• Allows us to live happier, more connected lives.

• Creates a more resilient economic system.

• Benefits society by increasing trust and transparency.

This is the future we want to see and this is what we are focused on building.

What is direct exchange? 🤝 

Not so long ago, every product we used had a story we could trace back to its roots. We knew the farmers who grew our food, the artisans who crafted our goods, and the journey each item took to reach our hands. Today, that connection is largely gone. The Industrial Revolution of the 20th century led to large centralized systems of production that enabled us to produce relatively affordable food, energy, medicine, and products to support a growing global population. But, these systems have led to long supply chains and multiple middlemen standing between the producer and consumer.

One click shopping and swiping left or right to purchase has given us convenience and abundance, but has resulted in buying products without knowing their origins, who made them, or how they reached us. This separation has created a world where consumption is often thoughtless, carries little meaning, and is detached from the impacts it has on peoples’ health and the planet. It makes us less happy and more disconnected. The joys of consumption and realities of production are no longer connected. We want to bring back that connection.

Direct exchange increases the meaning and happiness in our daily lives  😃 

Direct exchange: 1) creates a sense of community and belonging in our personal lives; and 2) improves productivity in the workplace. It may not seem very important, but having meaningful daily connections and work we are connected to are critical to our overall health and happiness. We don’t need studies to tell us this, but thought it was worth sharing independent data to demonstrate the point. Anecdotes from a couple studies:

• A study by the Project for Public Spaces found that people who shop at farmers markets have 15-20 social interactions per visit compared to 1-2 at a grocery store. Communities with robust farmers markets report higher levels of social interaction and community satisfaction. Knowing the story behind the food and products you consume increases the appreciation and enjoyment. For instance, learning about the farming practices of a local farmer can make a simple meal more meaningful.

• A 2019 study from the University of Oxford concluded that happy workers are 13% more productive. The study linked this increase in productivity directly to direct engagement and higher levels of satisfaction in the workplace.

Direct exchange is not easily measurable on a spreadsheet, but it’s critical to living a connected, meaningful life.

Direct exchange benefits local economies and small businesses 🏪 

Direct exchange can lead to cost savings for consumers, higher profit margins for producers, and boost local economies. For example, a small-scale farmer or artisan might receive only 30 cents on the dollar when selling through a wholesale distributor, but can retain up to 90 cents on the dollar when selling directly to consumers (we broke down the math in a previous newsletter). We have seen examples where companies who work directly with their suppliers are able to pay them 3x-5x more than the competition, while still selling their product at a competitive price. The American Independent Business Alliance reports that independent retailers return more than 3x as much money per dollar of sales to the local economy than large chain competitors. You can read more on their report about the Local Multiplier Effect.

The lure and value for producers to work with wholesale distributors and traditional retail is of course larger volume orders. But, if we can create opportunities for direct distribution at scale it can start to tip the scales the other way.

Direct exchange benefits society at large 🗺️ 

Direct exchange creates more transparency and trust on a societal level. This is a really important point as a higher level of transparency often results in higher quality and more ethical production practices. Additionally, shortening supply chains can greatly reduce carbon emissions. We believe direct exchange should extend into every aspect of our consumption and different sectors of the economy. The exciting part is we are seeing the emergence of new production technologies applied to biomanufacturing, additive manufacturing/3-D printing, and upcycling that will start to enable more decentralized production and regional supply chains. This reorientation on how our goods are produced and distributed will lay the foundation to develop many new paths for direct exchange.

What is standing in our way? 🧱 🚪 

We see three main obstacles standing in our way of adopting more direct exchange.

1. Convenience: Convenience is a significant factor as consumers and businesses have become accustomed to a one-click, on-demand economy. A 2018 Nielsen report found that 49% of consumers cited convenience as the primary reason for shopping at large retail chains.

2. Infrastructure: current supply chain and distribution infrastructure is optimized for centralized systems, wholesale distribution, and big box retail.

3. Awareness: many consumers simply do not know about the benefits of direct exchange or how to access these opportunities.

The conclusion: we need to build new digital and physical systems to enable more direct exchange that is as convenient as Amazon if we ever want to bring this to the masses. This is a tall order and will not be a straight line, but it’s something worth working on.

How creators can enable more direct exchange? 💡 

In today’s digital first world, it’s creators that can build community, drive culture, and move mountains. They have a powerful role to play in increasing the amount of direct exchange. Here are a few concrete ways:

1. Integrate and promote producers in their content

Creators can use their platforms to share stories of local producers and the benefits of direct exchange to raise awareness and inspire action. For example, popular food bloggers and YouTubers can feature recipes made with ingredients sourced directly from local farmers or producers. By featuring these businesses in their content, influencers can drive traffic and sales directly to these producers, fostering a direct exchange. Another example, fashion creators can collaborate with independent designers, showcasing unique, handmade items to their followers, which helps these small businesses thrive without relying on large retail chains.

2. Organize and promote in-person events and workshops

Creators can organize or promote events that connect consumers with local producers. For instance, a creator-led campaign promoting a, “buy local” week could significantly boost direct exchange activities and build lasting consumer habits.

3. Start their own companies/brands

This is an obvious one where creators can launch their own products and brands, cut out intermediaries, and sell products directly to their audience. By doing so, they can maintain control over the production process, ensure quality, and build a more personal connection with their customers.

4. Join companies as equity partners 

Creators can join existing companies as equity partners to help them cut out intermediaries and build new channels of direct distribution. When there is the right creator-product-market fit, creators can leverage their audience, cultural influence, and broader network in very effective ways.

5. Communication around transparency

Creators can use their platforms to communicate transparently about products, processes, and values. By sharing behind-the-scenes content, production details, and personal stories, they can build trust and authenticity. This approach helps to foster a direct connection among their audiences and products they consume.

Creators are just one piece of badly needed infrastructure to enable direct exchange at scale, but they are a critical one. They can help invent our own game and move towards a future where direct exchange becomes a significant part of our lives.

Have a great week and remember to Go Direct!

Build with love,

Jordan & Scott