Justin Floyd's End of Year CEO Update
Building The World’s First Open Commerce Network
Back in 2018, I outlined to our founding team our mission to build the first trading platform for the world’s small businesses.
As a child I grew up around trading goods and services. At school I traded soccer cards, buying from local markets and selling to my fellow school mates. I started my first business at 14, then my second at 17, all based on the principle of basic trade retail, that I bought smart, I could sell well to customers that needed my products. It was always hard, full of hurdles, friction, and intermediaries. Making any kind of profit was difficult.
The internet was going to change all of that. For the first time it was going to democratise trade, make it borderless, frictionless, seamless. Anyone could start, scale, and succeed in a retail business because you could reach anyone anywhere on the internet.
Except it didn’t work out that way. Centralised, overly funded e-commerce platforms, that were anything but, became the go to market for consumers, whilst crushing the businesses that were used to build the consumer experience. It was corporate enslavement of the little guy, and at some point the music stopped.
Today, prices of consumer goods are at an all-time high, monolithic and dystopian technology companies control pricing in an uncontrolled way, challenger brands from food to medicine cannot break into markets ruthlessly governed by aging private equity funded brands, and distribution channels are chronically underserved by technology innovation.
We believed that the 2nd coming of e-commerce would do a lot better than the first for a market that’s 10 times as large as the consumer market, that’s $11 trillion of the world’s most used consumer products traded yearly between businesses across the globe.
Open Commerce is a two-decade vision to build a new, dynamic, democratized, trading system for the world. Connecting FMCG brands, Distributors, and Retailers to transform the way they buy, sell and pay each other.
In 2023, RedCloud has been one of the founding pioneers of open commerce and become one of the fastest growing technology companies in Europe, pioneering mobile and open commerce for hundreds of millions of businesses.
Our daily shopping basket is populated by products from the FMCG industry, a sprawling, fragmented, volatile market proliferated by layers of producers, manufacturers, wholesalers, and intermediaries working through antiquated supply chains. The most popular products in the world, are being traded hundreds of millions of times a day, offline, through antiquated technology, decaying payment processes, and failed product launches.
Centralized trading is killing millions of businesses
The traditional distribution process that moves essential consumer products from the manufacturer’s warehouse to the retailer’s shelves and into the consumers’ hands is centralized and deeply dependent on many intermediaries, many of whom operate entirely manual processes and are chronically inefficient.
This inefficiency makes it possible for an increasing number of intermediaries to create artificial barriers across the supply chain, thereby increasing the prices of essential goods.
We believe that these barriers have far-reaching effects on both the global and local economies. For example, when stores cannot access the products they need at prices they can afford, they are forced to buy less stock, which means that consumers who need those products cannot access them. Paying for stock is costly, with resulting high transaction fees and other charges eating deep into the retailer’s profit margins.
Because of this inefficiency, large e-commerce platforms like Amazon have hijacked control of the supply chain by building their own distribution networks and locking out millions of distributors and stores from accessing the goods they need. This is, in turn, aggravated by highly centralized payment processors like Visa, Mastercard, and Stripe, who set high payment fees that eat into stores’ margins, as well as lock away the vital trading data needed to help build a more efficient trading system.
Store of Value
People love to shop globally but buy locally. That means buying from physical store-based retailers, who in turn trade with asset-heavy distributors, all of whom must make significant investments in inventory, real estate, and personnel for each retail location. That limits the amount of inventory that can be economically carried in each location, which means less choice and less sales, and eventually which generates a domino effect across entire supply chains.
Cost to serve
When you buy anything, from a cup of coffee to a bar of soap, hundreds of millions of data decisions have been made between trade buyers to give you both the availability, cost, and choice of that product. And those products must appear across millions of stores every day. Doing so requires higher service levels and shorter order-to-delivery cycles—in other words, overall agility.
Consider beauty and personal care, where direct sales and direct store delivery are dominant. Direct sales reps work on a presale model with no inventory, which means that service and agility are the basis of their competitive advantage. For all kinds of products, small outlets (such as mom-and-pop stores and drugstores) carry limited inventory and have limited working capital, so they run a greater risk of being out of stock on items than large retailers. (When they are not served well, they often have no choice but to switch to other brands to keep their shelves stocked.)
Reach
As a result, costs and inventory levels are higher for FMCGs that sell mostly through direct sales or direct store delivery. For instance, the costs for beauty and personal care companies that sell via direct sales are 3.7 times higher than those for companies that sell through traditional channels such as hypermarkets and supermarkets. Such companies also typically require 1.5 times more inventory.
Goodbye Retailer. Hello Trader
If Amazon’s goal has been to build the world’s biggest retail store, then RedCloud is about building the world’s biggest Traders store.
It’s the world’s first decentralized trading platform for the Internet economy, pioneering Open Commerce.
Our vision is this rapidly becomes a driver of an equitable marketplace connecting buyers and sellers and empowering them with real-world knowledge to buy better, sell smarter, and pay simpler.
That means most of our stakeholders’ inventory purchase decisions can be numerically modelled and analysed. We use historical purchase data to forecast customer demand for a product and expected variability in that demand and provide that to FMCGs, Distributors, and Retailers to seize new opportunities in growth markets, facilitate access to more buyers and streamline operations for Distributors, and help local Retailers spend more time selling products, not searching for them.
Our bold bets
Over the last decade, we have continued to make bold predictions on the fundamental shifts in online commerce and how that will shape the future of enterprises everywhere, and that is being amplified by the rise of aggregated power of small and micro businesses from the creator economy to the retail economy.
This is the rise of the trader, a trusted, secure, and important local seller of essential goods and services, and there are set to be over 1 billion of them over the next decade.
Open Commerce is sweeping away the centralization of traditional e-commerce and revolutionizing the way we all shop: driving new opportunities for anyone to participate in the global economy as retailers, traders, influencers, and sellers, resulting in a power shift from big to small.
Our founding principles
Outside of the bold bets we have made, we have founded our business on three principles.
First, that payments would always be free.
Second, online commerce will drive value for everyone, not just big Tech.
Third, that Open Commerce will bring new and sustainable brands to local retailers, enabling essential consumer products to become available for all.
We believe that a fundamental measure of our success from these 3 principles will be the shareholder value we create over the long term through the economic and social impact that we have in the markets in which we operate. This required a new kind of thinking and approach that needed an infrastructure-first approach. That’s radically different from the ‘big tech’ culture that’s invaded every part of society.
And so, we measure our success differently as well, and in the metrics most indicative of our economic and social impact. We have a platform that reflects the technology industry’s original but unmet vision of a platform where the ‘economic value of everybody that uses it exceeds the value of the company that creates it;’ we measure that through customer and revenue growth, the degree to which our retailers continue to trade and grow through us, and the strength of trust of FMCG’s in our brand.
Some of our highlights from a year to date demonstrate how businesses of all sizes are joining RedCloud to build a better, fairer commerce future.
- Trading volumes this year crossed $1.2bn annualised trading volume
- Over 320,000 products every day and growing are being bought and sold through the RedCloud platform by Stores, Distributors, and Brands
- Long-term relationships established with many important strategic partners, including Diageo, Danone, Standard Bank, King Crisp, SDG Group
- Our employee base grew to 356, including field officers, and we significantly strengthened our management teams
- Inventories available on our platform rose to over 40,000 products, enabling us to improve availability for our customers.
Open Commerce is the best way to build a better world
Open Commerce is the only way to build an equitable future for the expected 1 billion retailers, distributors, influencers, and traders responsible for moving essential consumer goods across communities. Open commerce is revolutionary technology built to level the playing field and provide any store, regardless of location, with the tools they need to grow and scale their businesses.
It should not be difficult for the small retailer in the most rural part of Africa to access products from any brand, neither should they have to travel kilometres on foot, carrying cash, to buy the products their communities need. Nor should it be difficult for a breakthrough FMCG brand to showcase their products for a new retailer experience through a trusted platform.
This is what Open Commerce solves. By putting simple digital tools in the hands of every retailer, we provide them with the tools they need to grow their businesses. Now, with our revolutionary Red101 Open Commerce app, stores can simply order for stock on their phones at any time of the day and have the products delivered to their stores or any location of their choice. We’ve also solved the cash payment problem by building the world’s largest local payment network, RedPay, with over 2 million cash-in points across 100 countries, allowing stores to walk to any nearby agent, digitize their cash, and begin buying their products. More importantly, by opening digital payments to these stores, they can build a trading history that allows them to access the credit they need to grow their businesses.
From the beginning, our focus has been on offering our retailers compelling value. We set out to offer customers something they could not get any other way and began serving them with instant buying, selling, and paying through a single app. We brought them much more selection than was possible in a physical store. We now offer customers an endless digital aisle of products with over 40k SKUs, one-click trading, and vastly more reviews, content, browsing options, and recommendation features. We dramatically lowered prices, further increasing customer value. Word of mouth remains the most powerful customer acquisition tool we have, and we are grateful for the trust our retailers have placed in us.
Open Commerce engages in three principal ways via brands, influencers, or individuals themselves:
Content-driven: Unique content created by brands, influencers, or individuals drives authentic discovery, engagement, and action. For example, social media users are discovering new goods and experiences via shoppable posts and in-app stores on Pinterest, YouTube, TikTok, Facebook, and Instagram, to name a few.
Experience-driven: These experience-driven channels enable shopping within an overall experience, most commonly live streaming, but could also include AR / VR experiences or gaming. Look at Obsess’s “Shop with Friends,” which enables groups to visit virtual shops with their friends.
Network-driven: People are harnessing their existing social networks to buy and/or sell. That could mean getting together to procure bulk discounts – a model used so successfully by Pinduoduo in China that it now has more active buyers than Alibaba. Or it could mean individuals using their influence and network to drive sales and earn commissions. India’s Meesho now has 13 million+ entrepreneurs who connect with their customers on social media platforms such as WhatsApp.
Open commerce is unbiased
Anyone with an internet connection can create a store, get paid in open commerce, spend in open commerce, and accrue wealth in open commerce. We don’t control access to all open commerce, and we don’t own the network. Anyone can access open commerce networks through other providers, which provides better competition for all. It means that third-party service providers, like logistics, financial services, payments providers, and insurance, can all sell their services to the open commerce community of stores and stores.
Open Commerce enforces transparent pricing
Today, pricing is controlled by wholesalers across large parts of the consumer products market. This is bad as it drives up the costs of essential consumer goods, kills small businesses, is predatory, and harms natural competition, which leads to higher prices for consumers. Over 100,000 new brands come to market every year, but their competitiveness is restricted as pricing is centrally controlled by wholesalers like Amazon.
We believe open commerce is a better, fairer way for lower prices to be passed onto consumers whilst expanding the opportunity for small stores.
Open Commerce in the community
As we remain committed to our mission of building a better world for the millions of stores in emerging markets, we are also giving back to the communities where we operate with various initiatives. This year, we launched the RedCloud Academy; our goal is to build an education system for young children to equip them in underserved communities with the skills they need to thrive in the digital economy. We train many of these young adults on digital skills for free and provide them with certificates and internship opportunities that would help them contribute positively to their societies.
These community events prove our commitment to building a new Open Commerce system for the World, where efficient supply chains will bring down the cost of food and other essential goods for billions of consumers and improve the quality of lives of children, especially those in disadvantaged markets. In line with our mission, we are hosting community events like this in all the countries we are currently operating, including the creation of food banks all over Africa to support the poorest in local communities.
The past year’s success is the product of a talented, smart, hard-working group, and I take great pride in being a part of this team. Setting the bar high in our approach to hiring has been, and will continue to be, the single most important element of RedCloud’s success. It’s not easy to work here but we are working to build something that’s changing the face of commerce. Such things aren’t meant to be easy.
We are incredibly fortunate to have this group of dedicated employees whose sacrifices and passion build RedCloud.
Finally, I would like to thank our investors, teams, customers and partners for their support and wish you all a happy holiday season and successful ’24.
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