Breaking Bad: Fixing a decade-long problem in the consumer goods industry
Imagine a world where you walked into a store to do your weekly grocery shopping, only to find that the shelves were empty. And not just at one store either. Imagine every grocery store empty, without the essential products we need. This may sound like an apocalyptic Idris Elba movie, but it is fast becoming a reality for many people, especially the poor in emerging markets.
The UN has described the state of food security and nutrition as a ‘humbling reality’, noting that the world has made significant progress towards ensuring access to food and other essential products for consumers worldwide. The Food and Agriculture Organization estimates that between 720 and 811 million people globally faced hunger in 2020, an increase of 118 million people from 2019.
These problems persist even though more consumer goods are being produced every year. In the face of this dire situation, we must ask, what exactly is the problem with consumer goods, and how do we solve it?
The global distribution ecosystem is broken
The answer is simple – a broken, outdated distribution chain.
FMCG is by far the world’s largest product category. 100,000 new consumer products are released yearly by over half a million manufacturers, yet these products take far too long to reach merchant’s stores – if they ever end up there. The global distribution chain of over 25 million distributors and hundreds of millions of local merchants is chaotic, complex, and fragmented, often relying on cash payments, personal business relationships and physical store visits by sales representatives to get products from factory to shelf.
The consumer industry is a $30 trillion market still dependent on legacy IT and bits of paper, an inefficient system perfected in the 1970s. For comparison, the video rental industry, a far more niche market, has evolved in under 30 years from simple rental stores to a technological marvel. Service providers can identify each customer with pinpoint accuracy and provide personalized recommendations on what to watch. On the other hand, many FMCG brands cannot identify who is buying their products and must rely on legacy data and imprecise customer demographics to manage their distribution network better.
B2B e-commerce is not the answer
While e-commerce has grown in popularity, especially over the course of the pandemic, it does not help brands and merchants grow their businesses or solve the distribution problems of the consumer industry.
For starters, the e-commerce model does not account for the billions of people who like to shop online but also want to shop and pay at their local store. Amazon’s recent weak e-commerce sales growth shows that there is still an advantage to physical retail.
In addition, the e-commerce space is dominated by a few centralized platforms that exercise monopoly power over the brands and sellers on their platform. As I pointed out in an earlier article, Amazon operates the largest online marketplace and simultaneously competes with third-party brands and retailers on the same platform. 75 percent of these brands and retailers live in perpetual fear of their businesses evaporating overnight due to direct competition from the tech behemoth. And the worst part is, when it happens (because IT WILL HAPPEN), there is almost no recourse, as recent investigations in Amazon have shown. Under this centralized e-commerce model, brands and retailers who sell on e-commerce platforms are usually blocked from knowing who is buying their products or even marketing to them directly marketing by the platform. This lack of visibility makes it impossible to grow their businesses or break into new markets.
Open commerce is key to fixing the decade-long problem in the consumer goods industry
We need a new type of commerce that breaks the monopoly of centralized e-commerce platforms while providing brands, distributors, and retailers with the digital tools they need to manage their supply chains better and grow their businesses. We need Open commerce.
A decentralized, open commerce platform will allow FMCG brands to directly connect with any customer in any market, see in real-time what products they are buying, and make data-driven decisions to ensure that customers have access to the essential products they need to survive. Open commerce can also solve another critical problem facing the consumer goods industry – the cost of cash. Across the globe, especially in emerging markets, most consumer goods payments are made in cash, as many merchants do not have access to bank accounts and are excluded from the formal financial system. This leaves them unable to access the credit they need to grow their business, a global credit estimated at over $5 trillion.
Creating a true ‘sell anywhere’ economy with open commerce, where consumers can access the products they need at prices they can afford, is no longer a dream. It’s reality.
RedCloud built the world’s first open commerce platform and unlocked the full power of the traditional distribution chain. Brands no longer have to grope in the dark and depend on unreliable, outdated data to make decisions. They can see in real-time, at the touch of a button, where the demand for their products is and effectively meet that demand. Combined with AI and predictive analytics, brands can accurately predict rapid spikes in demand and re-organize their supply chains in anticipation of that demand, ensuring that no customer goes hungry.
We have also built the world’s largest local payment network to make digital payments easy for even the smallest merchant who doesn’t have a bank account. With over 2 million pay-in points in over 100 countries, no merchant has to rely on cash payments and can save up to 15 percent of revenue usually lost to cash handling. More than that, trading with RedCloud allows merchants to build a digital trading profile and access the credit facilities that they need to grow their businesses.
We are pioneering a new, better future for the consumer goods industry, finally giving power back to brands and smaller merchants, ensuring that they can trade directly without any form of undue control or censorship. And I couldn’t be more excited about this future.