For decades, FMCG brands in emerging markets have depended on a traditional distribution model to penetrate a highly fragmented market and get their products to retailers’ shelves.
However, this model is grossly inefficient as it relies on costly cash payments and a large sales force who make hundreds of visits every week to merchant’s stores. With over 80 percent of all consumer sales in emerging markets occurring in small roadside shops and local markets, FMCG brands cannot capture any useable POS data from these stores in real-time. This leads to a severe lack of visibility across the entire distribution chain, making it almost impossible to identify new sales opportunities and drive growth.
But the story is changing. FMCG brands who are able to successfully disrupt their traditional sales process by combining data, analytics, and technology have generated above-market growth and an earnings before interest, taxes, depreciation, and amortization (EBITDA) increase of 15 to 25 percent.
FMCG brands in emerging markets must forgo age-old practices and digitalize their operations to keep up with the ever-changing demand trends and increased supply-chain volatility. By adopting new technologies and making data-driven decisions, they can better anticipate and maximize new growth opportunities.
The FMCG industry in emerging markets is changing
Over the last few years, the consumer in emerging markets has experienced a lot of change. Multiple trends have emerged that threaten to wreak havoc on established business models and sales strategies, while promising enormous rewards for the brands that can best anticipate new opportunities.
One of the biggest trends that will affect the FMCG industry is rapid consumer growth in emerging markets. Studies show that within the next few years, the growth of emerging markets will outpace that of the developed economies, with 1 billion new emerging market consumers created by 2025. Reports also show that these emerging-market consumers will become the dominant force in the global economy, as 60 percent of households that earn over $20,000 per year will come from emerging markets.
nother major trend that will affect the FMCG industry is the rise of the digitally conscious customer. The growing emerging market customer base is increasingly becoming digitally conscious. Already, more than half of all global internet users are in emerging markets, and a recent survey of African consumers in 15 cities across ten different countries found that 60 percent already owned internet-enabled smartphones.
The traditional distribution and sales model that FMCG brands have previously employed will not be enough to serve this ever-increasing consumer base. For example, while the experience of sales reps who physically visit merchant stores remains relevant, they cannot reach and satisfy the ever-expanding network of merchants who have rapidly changing needs and must compete in an ever-more-crowded marketplace.
FMCG brands in emerging markets must embrace digitalization to survive
Brands must therefore take the preferences of emerging-market consumers into account, disrupt, and redesign their distribution, sales, and marketing processes to better serve both new and existing customers. Brands that fail to adapt will squander crucial opportunities to build positions of strength that may be long-lasting.
While digitalization is essential, it is more important for brands to know exactly what and where to digitalize. FMCG companies must identify the most crucial areas of their businesses that can be optimized with digital technologies to drive the highest growth. We have identified three essential areas that brands must digitalize to survive in the coming years.
- Supply chain: The fragmented nature of the retail market in developing economies makes brands susceptible to supply chain disruption, with an estimated 40 percent of brands having some supply chain disruption in the last few years. Traditionally, FMCG brands are left in the dark, lacking insights into who is buying their products and are unable to collaborate with channel partners. By embracing digitalization, such as digitizing the stock ordering and inventory management process, brands manage their distribution network more efficiently and generate real-time, data-driven forecasts for future demand.
- Payments: Despite the rise of mobile payments, over 90 percent of all retail payments are still made in cash which is costly for all players along the supply chain. Digitizing retail transactions will enable brands, distributors, and retailers to better manage their cash flow across all layers of the supply chain. Digital payments also allow underserved retail merchants to build up a digital trading profile that can be leveraged to provide a wide range of digital financial products, including credit and insurance.
- Sales and marketing: By embracing digitalization, brands can leverage data analytics to generate actionable, easy-to-understand insights and make data-driven decisions that drive growth. Armed with these insights, front-line sales reps are transformed from order-takers to territory managers that can better serve merchants and drive consistent growth.
To successfully digitalize these processes, FMCG brands need a powerful yet easy-to-use digital solution that can be rapidly scaled across the entire distribution chain and provides clear, demonstrable benefits for brands, distributors, and merchants. RedCloud is that platform.
Drive digital transformation with RedCloud
RedCloud has built the world’s first open commerce platform, a decentralized, open trading platform that digitalizes the entire distribution chain. With RedCloud, FMCG brands have real-time visibility at POS across the entire distribution chain. Existing business relationships are transformed into data points that enable FMCG leaders to see in stark detail where the demand for their products is, observe the change in demand for their products across multiple geolocations and directly engage every single merchant in their distribution network.
With RedCloud’s open commerce platform, sales and marketing leaders can access real-time, actionable, granular insights on every channel partner in their distribution network. These insights can then be leveraged to increase customer engagement and create data-driven promotions and campaigns to drive growth.
RedCloud also has the world’s largest local payment network with over 2 million pay-in points across 100 countries. This allows merchants across emerging markets to easily make digital payments, even without a bank account.
Schedule a demo with us today to see how RedCloud can help you digitalize your business and drive consistent, outsized growth.