The distribution chain is the heart of the FMCG industry, keeping retailers’ shelves stocked and end consumers satisfied. For decades, FMCG brands in emerging markets have operated through a traditional distribution model dependent on a manually connected network of intermediaries to move products from the manufacturers to end consumers. However, the pandemic has tested the ingenuity, resilience, and flexibility of this distribution model and found it wanting as brands and distributors have been unable to keep up with rapidly shifting demand patterns and consumer behavior.
To maximize the $30 trillion growth opportunity that exists in emerging markets, brands must fundamentally revisit their distribution models and transform themselves. If they stay with the traditional, manual model of distribution that relies on van sales and cash sales, they will struggle.
Friction in the distribution chain is fatal.
Fundamental changes in consumer behavior, and the limitations of traditional distribution model are knocking brands and distributors off-balance, leading to significant friction in the value chain such as:
- Lack of visibility: Under the current distribution model, data is still very fragmented, and visibility is dependent on stakeholders providing information manually. Therefore, brands and distributors are essentially flying blind, unable to identify rapidly shifting demand patterns or make strategic data-driven decisions in real-time. This leaves sales teams unable to meet their targets as growth opportunities are left untapped and market share is lost.
- High SG&A costs due to manual operations and cash payments: Many FMCG brands and distributors spend up to 25% of revenue on SG&A costs due to an inefficient model that requires sales reps to spend countless hours on manual data collection efforts, reducing time spent on valuable, revenue-generating tasks. Cash payments are one of the biggest barriers to doing business in emerging markets as cash processing and reconciliation costs brands and distributors between 2% and 9% in revenue annually.
- Lack of communication and engagement with retailers: Van sales are commonplace in emerging markets, an inefficient distribution model in which there is very little communication across stakeholders in the traditional chain, leading to low sales velocity and longer lead times between orders.
These challenges underscore the need for FMCGs to accelerate the adoption of digital distribution and value chain transformation to outmaneuver uncertainty and maximize existing growth opportunities.
Eliminate distribution chain friction with RedCloud.
The traditional distribution model is no longer enough in today’s competitive retail market, with reports showing that 75% of the largest FMCG brands have had negative or strongly negative impacts on their businesses due to distribution chain disruptions, and plan to downgrade their growth outlooks. In contrast, e-commerce and smaller brands that employ digital distribution models have experienced significant growth as consumers in emerging markets made the greatest shift to e-commerce and digital commerce, and United Nations Conference on Trade and Development (UNCTAD) reporting that digital commerce’s share of retail trade grew from 14% in 2019 to 17% in 2020.
Eliminating friction by digitalizing the distribution chain requires stakeholders to build sufficient flexibility by leveraging a technology-led platform that connects the entire value chain and supports applied analytics to provide in-depth insights at POS. This is what RedCloud, the world’s first open commerce platform provides – an innovative platform that transforms existing industry interactions into potential data points and placing valuable data insights at your fingertips.
RedCloud eliminates the friction in the distribution chain by:
- Providing in-depth insights: By connecting FMCG brands, distributors, and retailers, we unlock the full value of the distribution chain, providing real-time data across the entire value chain and empowering brands and distributors to make strategic decisions to increase revenue and drive growth.
- Increasing efficiency and reducing costs: Up to one-third of sales tasks can be automated, and with RedCloud automating the data collection process, sales teams become more efficient, and can spend more time on generating new sales opportunities, leading to a sales uplift potential of up to 10%.
- Providing instant and automated communication to drive engagement: Personalized, targeted marketing campaigns can increase revenue by up to 15%. Our proprietary platform allows you personalize and automate communications with retailers to drive engagement and increase order velocity.
To learn more about how our proprietary platform is eliminating distribution chain friction and driving revenue growth by up to 25%, schedule a demo today.