Mission: Zero Recalls

A full-stack solution to quality control

Everyone is sick of product recalls.

If it feels like you hear about a new recall every day, that’s because there’s actually a new US food recall every 11.5 hours.

Our initial Labdoor thesis was formed through a series of observations:

Recalls are the wrong way to regulate consumer products.

Recalls are reactive by definition. Just like in healthcare, the incentives around quality control are fundamentally misaligned in a way that prioritizes spending on cures instead of prevention.

Recalls are triggered by adverse events. When enough consumers report negative side effects to the FDA, the FDA initiates an investigation, which may lead to a recall. Unfortunately, it can take many years, and thousands of complaints, before a failed product is finally removed from the market.

“In 2014, the FDA began investigating WEN by Chaz Dean Cleansing Conditioners after directly receiving 127 consumer reports. The FDA later learned the manufacturer had already received 21,000 complaints of alopecia and scalp irritation. The product remains on the market with the FDA currently soliciting additional consumer reports.”
Kwa, Welty, Xu, June 26, 2017.

I saw this first-hand while launching Avomeen Analytical Services in 2010. Our testing lab developed a speciality for rapid failure analysis, reverse-engineering recalled (or soon-to-be recalled) products to quickly investigate and solve quality control issues. The testing was difficult, expensive, and filled with legal and regulatory requirements.

Every new project was a reminder of the importance of consistent, transparent quality control before these products reach consumers.

Consumers now have millions of purchasing options.

Overall, 30x more new products are released each year than were launched annually just 50 years ago. And with the rise of ecommerce, practically any product worldwide can be sold to consumers directly.

To put this in perspective, Walgreens averages 22,000 products per store. Amazon now has over 300,000,000 products in its store.

It’s no surprise then that Amazon struggles with counterfeit products and fake reviews — it’s impossible to completely regulate a marketplace of that scale. We’re forced to separate the best from the worst online ourselves. This is a clear example of where a bigger selection is worse for consumers.

Source: https://www.wsj.com/articles/why-there-are-more-consumer-goods-than-ever-1461556860

Reviews and ‘experts’ can’t judge the quality of credence goods.

Even when user reviews are honest, they’re still reactive by definition too. User reviews work best for experience goods, like restaurants or movies, where quality is quickly and directly observable. Sites like Amazon work best for search goods, where you already know what you want.

There is a third category, credence goods, where it’s hard to access quality. This includes most food and health & personal care products, basically everything in a Walgreens or Whole Foods. We usually trust ‘experts’ here, whether they’re professionals or influencers, to help us make these purchasing decisions. However, for non-regulated products, basically everything outside the pharmacy, these people don’t have the analytical or clinical data needed to make informed recommendations.

Quality control needs to be integrated directly into the flow of retail.

We need proactive quality control at every level in the supply chain. Pre-market testing is already required for pharmaceuticals, and will soon be law for cannabis testing in states like California.

For all other credence goods, there ought to be a full-stack solution that integrates testing and commerce into one consumer-driven platform, a marketplace that continuously analyzes the quality of its supply chain and utilizes this data to efficiently recommend the best products to its customers.

I believe that the company that solves this challenge for consumer products will be the fourth dominant retailer, and have spent the last 5+ years building Labdoor towards this target.


Towards the fourth retail revolution

Sears (f. 1893), Walmart (f. 1962), and Amazon (f. 1994) led the first three US retail revolutions. Each retailer built a dominant strategy based on better selection and better prices than their predecessors. In the short-term, we consumers love these obvious benefits. But there are side effects too.

These dominant retailers force price-based competition on a growing number of suppliers, leading to an ever-widening race to the bottom:

  1. Retailers optimize for high selection and low prices.
  2. Consumers can’t easily verify the quality of these products.
  3. Suppliers compete on price and/or brand instead of quality.

The end result is a market of lemons.

The metaphor here is a used car market — if there’s no easy way for consumers to tell the difference between a high-quality car (a “peach”) and a low-quality car (a “lemon”), then sellers will soon realize that it’s more profitable to sell lemons, causing sellers of peaches to leave the market. Eventually, only lemons are for sale.

The answer to such failures in free markets has usually been government regulation, which forces products like pharmaceuticals to verify their safety and efficacy prior to being sold to consumers. But this kind of pre-market regulation is inefficient at best and illegal at worst. It’s simply not practical for every category of consumer products, from food to supplements, cosmetics to personal care products, to be forced through an FDA-style regulatory process. How can we make it easy for consumers to buy peaches and avoid lemons?

The solution is a full-stack marketplace with product testing and discovery at its core.

My vision for Labdoor is a platform that combines the scale and accessibility of an online marketplace with the rapid testing capabilities of an FDA-registered laboratory. We don’t want to be “The Everything Store.” We want Labdoor to offer “Everything That’s Fit to Sell.”

Labdoor will be the metamediary for a wide range of consumer products, providing commerce and testing services that seek to efficiently and effectively connect the right buyers to the right sellers, built on Labdoor’s proprietary data & intelligence.

Our efforts are focused by a simple idea — consumers always want to shop smarter, easier, and cheaper.

We must win all three simultaneously to build our own dominant strategy:

  1. Smarter means a perfectly curated selection of products for you. This means continuously testing new products to understand the market and consistently learning your preferences to understand your needs.
  2. Easier means a frictionless customer experience. Our data and rankings make it easy to make smart purchasing decisions. New services like Labdoor&Me will offer free expert advice when you need help.
  3. Cheaper means you only buy the products you need on-demand. We’ll build auto-reordering programs and daily packaging options to ensure you waste less and save more.

Climbing up the supply chain

As more consumers use Labdoor to find and buy the best products, we will be able to recruit more manufacturers and suppliers to use Labdoor Testing Services (LTS) to publicly certify the quality of their products and ingredients. LTS will also expand into regulated markets like pharmaceutical and cannabis quality control where testing is already required.

LTS is our solution for the Testing, Inspection & Certifications industry, a $77B global market still led by Bureau Veritas (f. 1828). We’re many decades overdue for a full-stack solution to quality control, and Labdoor is on its way to proving that this necessity is finally becoming a reality.


Scaling Labdoor’s platform

The big challenge with launching full-stack startups is that there are so many moving parts in the business to optimize simultaneously. Labdoor is a great example — we operate an analytical laboratory, certification program, technology stack, consumer marketplace, and ecommerce fulfillment under three roofs, all with just 22 total people.

To focus our resources and ensure quality, we deliberately scaled our marketplace one category at a time, providing the full-stack experience first only for protein powders, then fish oil, etc. Today, Labdoor has tested and ranked 32 supplement categories, totaling over 900 products.

The good news is that once our functions are installed, they’re easily extendable to new products and services. Each business unit at Labdoor is designed to be interoperable both internally and externally, which allows us to quickly launch new businesses like LTS by plugging into our existing Laboratory unit. Our platform benefits from economies of scale and scope, strengthening our position as we grow.

We chose supplements as our first vertical to test since it’s well-known as one of the most lemon-filled markets in the world. Now we’re looking to expand throughout the drugstore and beyond, expertly curating consumer products one category at a time:


Chasing our mission

When the mission is zero recalls, our work is never over. There will always be new products, suppliers, and manufacturers entering the market, along with different, better ways to effectively guide and serve our customers.

Our five factors for full-stack success:

  1. (+) Trust: Consumer trust and safety is the key to marketplace growth.
  2. (+) Accuracy: Accurate data builds trust, improves product discovery.
  3. (+) Experience: New products and services help us avoid competition.
  4. (+) Speed: Rapid R&D enables expansion into new verticals.
  5. (-) Cost: Efficient cost structure lets us survive long enough to scale.

Perfection is our horizon line. We’ll never get to the end, but we will make forward progress every day. And if we move fast enough, we’ll reinvent a couple key industries along the way.

“It’s a long way to the top (if you want to rock ’n’ roll).”
— AC/DC

My last post on Medium, 2017 Labdoor State of the Startup, tells the story of Labdoor’s first five years of operations.