A walk through any major market in any major market in any emerging economy will show the same scene, thousands of little shops and open-air stalls selling essential consumer goods. These small stalls and shops are responsible for over 80% of all consumer goods sold in emerging markets. In some markets, like Nigeria, that figure can rise to 97%, representing billions of dollars worth of trade done entirely manually.
However, the process of distributing these consumer goods to the retailers and merchants who sell to the final consumer across the fragmented retail market in emerging economies is a complicated task. The traditional trade model heavily depends on interpersonal relationships between field agents and retailers, as well as physical visits to fill and collect orders from retailers. This model is grossly inefficient and causes erratic demand, which leads to empty shelves and lost sales opportunities.
This article examines how Open Commerce can help brands, distributors, and retailers become more effective, save costs, and increase revenue.
Why the traditional retail model is ineffective
In emerging markets, multinational brands struggle to get their products to customers and face a bewildering kaleidoscope of strategic and operational challenges. They must grapple with a chaotic array of shops, open-air stalls, kiosks, and street vendors who seem to offer consumers a little bit of everything, from groceries to branded goods. The fragmented nature of these markets makes last-mile delivery slow and inefficient, and the total dependence on physical visits to distribute stock means that thousands of dollars and manhours are wasted daily.
Manufacturers and large distributors need a large army of field agents who travel long distances to serve the spread-out distribution network of stockists, wholesalers, and small retailers. These field agents often have to carry large amounts of cash paid by retailers and distributors, which can be risky and costly. Smaller shops and stall owners in rural areas are also faced with the same challenge: they have to travel long distances to the city center, often carrying large amounts of cash to purchase stock. This delay is even more complicated in major cities like Lagos, where traffic congestion is at an all-time high. A recent report shows that 14.12 million manhours and 3.834 trillion are lost daily and yearly due to traffic congestion.
Under this inefficient distribution model, retailers cannot place orders for stock at the point where it’s needed; instead, they are forced to wait for field agents to visit them to take orders. Sometimes, the field agents accompany the delivery vehicle and fulfill the order on the spot. Other times, the field agent has to take the orders and transmit them to the sales team, who then plan a delivery beat based on the orders generated across specific geolocations. However, this system is slow and cumbersome and leads to avoidable delays that prevent retailers from getting the products they need when they need them.
Digitizing the supply chain can improve efficiency
The solution to creating a more efficient distribution chain is to digitize the entire supply chain. By digitizing the distribution process, sales teams can see in real-time where the demand for their products is and create efficient delivery routes that ensure that lead times are shortened and retailers’ shelves are kept stocked.
Brands that are able to adopt digital solutions to craft nuanced strategies aimed at traditional retailers can raise their revenues from emerging markets by 5 to 15 percent, and increase profits by 10 to 20 percent.
However, digitizing an entirely manual supply chain that has operated in the same way for decades is not an easy task. Many FMCG brands have attempted to build digital solutions or sales apps, but they almost always fail. Available statistics show that over 70% of all digital transformation initiatives by FMCG brands eventually fail due to three main reasons:
- Low retailer adoption: When FMCG brands attempt to digitize their supply chain, they almost always do it to solve their problems. Unfortunately, these digital solutions do not provide a compelling enough reason for retailers and distributors to adopt the app, which is why it eventually fails.
For example, many FMCG brands have built digital shopping apps that allow distributors to order from them and pay digitally. This is valuable to the brand because it eliminates the costs of cash payments. However, it does not provide any value for the distributor or retailer, who is saddled with the responsibility of digitizing cash. In addition, most distributors and retailers carry SKUs from multiple brands and do not see any reason to adopt an app that only allows them to purchase from a single brand.
- High costs of digitization: Digitally transforming the entire supply chain has been seen as a high-cost endeavour that could cost millions of dollars. For example, ERP systems are the most popular digital solution for large consumer brands, but migrating to the latest SAP/4HANA ERP standard can cost up to half a billion dollars for large multinational organizations.
Despite these huge investments, ERP systems do not provide much value in emerging markets, where traditional trade reigns supreme. As a result, many FMCG brands cannot justify these huge expenses to digitize their supply chains.
- Lack of sales team technical know-how: Most of the digital solutions available are complex and require highly skilled IT staff to run them. The steep learning curve required to use any digital solution effectively poses a significant barrier to the sales team, who often end up conducting sales offline because it is easier.
To build resilient distribution networks, improve end-to-end visibility across the supply chain and make retail business more efficient, we need a new type of digital solution.
We need Open Commerce.
Make your business more efficient with AI-powered Open Commerce
Open Commerce is a new way of trading that unlocks the full value of the traditional distribution model. It is designed to enable brands, distributors, and retailers to connect and trade directly with each other on an open digital platform without any restrictions.
Unlike other digital solutions, anyone can get started with Open Commerce because it is easy to use and provides clear, compelling value for everyone along the distribution chain. Brands gain real-time visibility across the supply chain with access to syndicated, real-time data from over 50,000 live data points. Distributors can buy directly from brands and sell to retailers on the same app, making it easier to manage their entire retail business online. Retailers of any kind can log onto a simple app and, within 24 hours, access multiple distributors and brands and start placing orders for their stock.
RedCloud has built the world’s first AI-powered Intelligent Open Commerce platform, Red101®. With the Red101® app, retailers simply need to download an app, and they can manage their business right from their mobile devices; retailers in even the most remote locations can buy stock from any brand or distributor to restock their shelves.
For brands and distributors on our Intelligent Open Commerce Platform™, you can make every single customer or field agent’s journey worthwhile because you know that you are responding intelligently to existing demand, which leads to consistent sales growth month-on-month.
Schedule a demo with us today to see how we build resilient supply chains in emerging markets and make retail businesses of all sizes more effective.