Globally, emerging markets account for 55 percent of the total consumer spending of FMCG products. Within the next five years, over 5 billion new middle class consumers will be created in these markets, and their spending is expected to exceed $6 trillion. To serve this rapidly growing consumer base, distributors and wholesalers across developing markets must leverage digital technologies to build a resilient and responsive distribution chain.
The pandemic has revealed the lack of resilience in the traditional FMCG supply chain, as many distributors have struggled to handle the rapid change in demand for the products that they carry. Distributors and wholesalers now see the need to make data-driven decisions to serve retailers better and maximize their margins. For example, under the traditional distribution model, distributors have mainly acted as order takers, delivering goods from the manufacturers to merchants at the cheapest cost per mile. However, to minimize future supply shocks, many distributors now plan to incorporate digital solutions that provide real-time data and insights across the supply chain to enable strategic, data-driven decision-making.
The traditional distribution chain is no longer fit-for-purpose
Distribution across emerging markets is mainly informal, with up to 80 percent of all consumers shopping from stalls that are set up at the roadside or in local markets. Thus, distribution across this highly fragmented market remains hugely complex, leaving many distributors unable to properly penetrate the market and get the right products to the right shops at the right time.
Van sales are the major distribution channel across LATAM And Africa, a highly inefficient model where distributors load their products into a van and drive along a pre-determined route to visit retailers and merchants to discover if there is a demand for the product. If there is a demand for their products, the sales rep either sells to the merchant on credit or receives a cash payment. The van visits multiple retailers, returning to the distributor with raw cash and any unsold products at the end of the day.
This model is outdated and no longer ‘fit-for-purpose,’ as it lacks visibility and leaves distributors unable to detect and respond to changing demand. Wholesalers are often forced to sell their products on credit or at lower prices to reduce inventory costs, a practice that eats into already-thin margins. In addition, this model encourages the almost-exclusive use of cash, which is risky and costly as the funds can be stolen or mismanaged.
A digital solution that provides real-time, end-to-end visibility across the distribution chain in emerging markets is the key to offering a new degree of resiliency and responsiveness. This solution must also withstand the daily shocks of rapidly changing demand across the market and will solve one of the biggest challenges wholesale distributors face. Therefore, digitalizing the supply chain will enable distributors to go beyond reacting to market disruption, to anticipating them and adjusting the supply chain immediately while still providing the most efficient and cost-effective service delivery.
Build a resilient distribution chain with RedCloud’s open commerce platform.
With increased mobile phone penetration across emerging markets, wholesale distributors are taking the first step by placing calls to retailers before delivering to them, but this is not nearly enough. Without real-time visibility and a solution that enables retailers to pull demand, wholesale distributors cannot make the right decisions that increase sales and drive growth.
RedCloud has solved this problem by building the world’s first open commerce platform – a platform that directly connects FMCG brands, distributors, and retailers. With RedCloud, distributors can buy products directly from any FMCG brand and pay digitally, while simultaneously selling to retailers on the same platform and accepting digital payments.
Our platform also provides end-to-end visibility across the distribution chain. With the click of a button, you can track demand across various product categories, retailer types, or geolocations and generate granular insights to identify new or existing retailers willing to buy from you. These insights help distributors make strategic data-driven decisions that increase sales and drives growth.
We have eliminated the friction along the traditional FMCG supply chain and given you the tool that you need to make strategic decisions and build resilience into your distribution chain. Schedule a demo today to see how RedCloud empowers distributors in emerging markets to create more resilient distribution chains.