Cash still remains the largest cause of friction in distribution chains across emerging markets, as less than one-third of the $13 trillion in payments between suppliers and retailers are made electronically. This over-reliance on cash affects FMCG brands significantly and can lead to lost sales opportunities as many retailers return or cancel orders at the point of delivery due to the lack of cash at hand. Eliminating cash from the supply chain can potentially resolve this and lead to more sales opportunities but remains an enormous challenge.
Many of the cash digitization initiatives by FMCGs and large distributors have failed as they do not provide any significant value for most merchants, who find cash payments convenient. To solve the cash problem and recover lost sales opportunities, FMCGs need a solution that digitizes cash payments while also providing a powerful incentive for merchants and retailers to adopt the solution.
Cash payments are costing FMCGs more than money
Customers in developing economies rarely pay local merchants electronically, so most retailers prefer paying their suppliers in cash, which requires a high level of interaction between retailers and delivery staff and often results in multiple delivery attempts for a single order. Fully or partially returned orders are lost sales opportunities for FMCG brands and lead to increased costs as well as higher inventory costs due to unproductive inventory in the delivery pipeline.
Cash payments also prevent FMCGs from gaining visibility at POS as it is virtually impossible to know who is buying their products in real-time, and sales teams must depend on data from field officers that are often inaccurate.
Many FMCGs have attempted to eliminate cash from their supply chains by creating their own apps but have failed due to low merchant adoption rates. Merchants do not want to adopt an app that only allows them to pay a single supplier, given that the largest supplier represents only 30 percent of the cost of goods sold by a typical small retailer. A stronger business case for retailers to adopt electronic payments is a solution that is easy to use and widely accepted by several suppliers.
Recover lost sales opportunities with RedCloud
Low levels of financial inclusion and high levels of mobile penetration in emerging markets provide an enormous opportunity for digital payments solutions that do not require merchants to have a bank account, such as mobile money and cash-in-cash-out operations.
RedCloud is solving the cash digitization problem in emerging markets with the world’s first open commerce platform. We have partnered with some of the biggest cash-in-cash-out operators in Africa and LATAM to enable merchants to digitize their cash easily. We also enable merchants to connect directly with global FMCG brands and pay directly on the platform without a bank account. This provides merchants with a compelling incentive to adopt the platform and is evident in our industry-leading app adoption and retention rates.
With RedCloud, FMCGs can significantly increase sales velocity by connecting directly with their merchants in any market to receive orders and get paid instantly. This eliminates orders cancelled by retailers due to lack of funds and saves up to 16 percent of lost revenue. High SG&A costs are also reduced as last-mile delivery becomes more efficient and demand-driven. In addition, merchants can build up a digital trading profile on the platform, which allows FMCGs to provide credit to their top-selling merchants and meet excess demand.
RedCloud is reinventing commerce and empowering players in the FMCG industry at every level to sell smarter, buy better, and pay simpler. Schedule a demo today to see how we are helping FMCGs in emerging markets recover lost sales opportunities and save up to 16% of revenue lost on returned and cancelled orders.