Open commerce platform takes on big tech
Silicon Valley might get the most mentions when it comes to technology breakthroughs – thanks to industry giants such as Apple, Google, PayPal, and a long list of other big tech companies based in North California’s innovation hub. But it’s worth remembering that major digital developments can happen elsewhere too. A great example is M-PESA, pioneered by Kenyan mobile network operator Safaricom in 2007, which today serves more than 51 million customers in multiple countries. M-PESA has put mobile money on the map, but it’s just the beginning in digitizing how goods are bought and sold. Open commerce platform providers are linking sellers with brands, distributors, and consumers to radically improve supply chain operations.
Across Africa, Latin America, and Asia, billions of customers depend on hundreds of millions of small retailers to keep them supplied with food, drink, and other important high-volume consumer goods such as automotive supplies. In many cases, these goods are traded non-digitally, and cash remains king.
The reluctance to use the traditional banking system comes from delays in cash being credited to customer accounts, and that’s after having to sometimes queue for hours to deposit funds in the first place. It’s meant that small retailers have had to be highly entrepreneurial to turn a profit. And inefficiencies in buying and selling mean there’s considerable scope for open commerce platform solutions to make a huge difference to the bottom line.
Solving supply chain issues
Lack of data can trigger a domino effect across the supply chain, where unpredictable production makes distribution harder to manage, potentially leaving retailers short of goods to offer customers. Having shops that are overstocked with goods that shoppers don’t want and understocked with items in demand isn’t ideal. But digitally connected marketplaces can change that. And the good news for regions that are under-served by conventional financial services is that systems don’t need to be built on top of traditional banking networks.
Also playing into this wave of technology innovation is the emergence of feature-rich, yet affordable smartphones. Returning to the example of M-PESA – which is operational in Kenya, Tanzania, Lesotho, Democratic Republic of Congo, Ghana, Mozambique, and Egypt – over 25% of all users have access to a smartphone. What’s more that number is growing by 10% each year, according to Vodafone figures.
Telecommunications infrastructure is changing too, to become smaller, lighter, more efficient, and – in some cases – self-powered. And these developments are helping to improve wireless network coverage and bring open commerce platform services to more users for more of the time.
So what does an open commerce platform look like, and what can digitally connected marketplaces do? Taking the services offered by RedCloud – an open commerce pioneer, which has been developing its platform for a decade – as an example, retailers can view details such as the value of customer orders, last order dates, order frequency, favorite purchases, and whether clients have engaged with any recent sales promotions.
Smartphone-enabled stock control
Having this knowledge about buying patterns and behavior helps smooth stock control and makes sure that shelves are holding just the right amount of goods. The smartphone app also features an eWallet, which can be loaded via widely available Airtime Top-Ups that convert cash into digital credit. “We have the world’s largest local payment network,” Justin Floyd, CEO of RedCloud, told TechHQ. “Funds are cleared instantly, and users can start trading straightaway.”
The digitally connected marketplace makes it routine to reconcile payments and saves retailers time on administration. RedCloud engages with brands and distributors too. Companies can load their inventory onto the system and use the data insights to improve their operations. For example, visibility over product consumption allows food and beverage manufacturers to plan production so that they have the capacity to fulfill more contracts and are less likely to have to turn away orders from distributors.
Surveys suggest that digitization can reduce selling, general, and administrative expenses (SG&A) costs by 70% and increase sales by 25%. And Floyd is aware that the compelling business case attracts other open commerce platform solutions into the market. “We are competing massively against big tech,” he points out. “And those businesses will fight hard to keep what they have.”
But RedCloud’s low take rate of around 1.5% (the actual figure varies between brands, who pay to have their inventory on the open commerce platform) gives the firm an advantage over payments giants. Mainstream providers typically charge much higher fees that make services unattractive to smaller retailers, who may only have slim margins themselves.
Having been involved in building companies his whole career, Floyd is sympathetic to the struggles of small business owners, who can often face multiple hurdles when starting out. For example, to open a company bank account you may need a trading history, but generating that trading history becomes difficult without a bank account to pay money into and out of in the first place.
Fortunately, open commerce platforms are helping businesses jump such obstacles armed with just a smartphone. And not just in the big tech heartland of Silicon Valley, but all over the world.
9 June 2023