The Open Commerce revolution: towards a more efficient and equitable supply chain

These products, such as food, cleaning supplies and personal care products, which, according to Statista, generate 63.8% of global retail income, reach the final consumer through small businesses such as kiosks, neighborhood pantries or self-service stores and small and medium-sized supermarkets that in Argentina we identify as the “super Chinese”. This entire segment of small businesses operate with obsolete processes, a situation that severely limits their ability to compete and affects the availability of essential products in local communities.

This, paradoxically, occurs in a context of unstoppable expansion of e-commerce: according to a report by GlobalData, the total value of e-commerce transactions is estimated to reach 9.3 trillion dollars by 2027, with compound annual growth 9.5% from 2022. E-commerce transactions increased exponentially, reaching $5.9 trillion in 2022 from $2.5 trillion in 2016, with a compound annual growth rate of 15%. The COVID-19 pandemic was a key catalyst, accelerating the shift to online shopping due to lockdowns.

In Argentina, electronic commerce also experienced notable growth. The country’s e-commerce market, the fourth largest in the LATAM region, grew 87% between 2021 and 2022. This growth, along with high internet and mobile penetration rates, suggests strong potential for continued expansion . According to the Argentine Chamber of Electronic Commerce (CACE), in 2023 more than 1.4 million new consumers bought online for the first time, raising the total number of electronic commerce consumers to just over 23,247 million. Total sales volume also reflected this growth, with more than 489 million products sold in 234 million transactions, an increase of 16% and 11% from 2022, respectively. The industry’s turnover skyrocketed 175% to reach a total of 7.8 billion Argentine pesos (around 9 billion dollars).

However, despite this volume and expansion of both retail trade, mass consumption items and electronic commerce, the expected marriage between all these phenomena has not occurred. In a certain way, they have developed in a relatively parallel way, without touching each other too much and without articulating a B2B supply chain, with suppliers, distributors and manufacturing brands disconnected and dispersed but subject, together, to the dictates of traditional and larger actors. ecosystem size. Much of the trade in consumer goods still depends on traditional offline processes, where cash transactions, manual inventory management and a lack of visibility throughout the supply chain are common.

Although at first glance it may seem otherwise, the commercial process as a whole, at the B2B level, is not affected by electronic commerce technology.

Consumption and the wholesale business is huge, but it’s all offline and it’s all with pen and paper and emails; there is no technology involved there. There have been no major changes in the way companies source, buy and pay for consumer goods across the market, despite advances in e-commerce technology.

Lack of innovation and inefficiency in the B2B commerce space has caused consumer goods prices to remain high as brands, distributors and sellers still have to go through the traditional offline supply chain. , which has been going on for decades.

Small businesses generally have few options in terms of assortment: they work with a limited menu of distributors or they have to source from a wholesaler under the “Cash and Carry” model. You have to physically go to buy everything, settle there, stand in long lines. And it’s not necessarily getting a good price. These hyperwholesalers have promotional dynamics that at first glance seem attractive and end up not being so. They find that, for example, oil or sugar was at a mega good price, but then they end up buying other items at very bad prices, for which they do not end up with a very good final price for the entire purchase.

Traditional e-commerce doesn’t help you: it’s predatory, controlling, and benefits only the big tech providers who own all the data and try to own the entire supply chain. This centralized model is killing small businesses by restricting access to the tools needed to drive growth.

The dominance of a few e-commerce platforms also contributes to the constant rise in prices of consumer goods, as these platforms often operate on high margins and even launch their own white label products in high volume or profitable categories. This approach leaves both brands and suppliers vulnerable, who are systematically excluded from the benefits of online commerce and forced to continue with the outdated and inefficient offline supply chain or to relinquish control of their entire supply chains to sell in e-commerce.

Justin Floyd, founder of RedCloud Technology, breaks it down clearly: “We ended up consolidating everything into very few oligopolies. Amazon, Alibaba and Google are the main players and this consolidation, instead of making technology work for the better, was done to ensure their dominant position“.

So what solution is needed? Argentina’s B2B consumer goods sector needs a new e-commerce model that digitizes the long-tail retail supply chain and offers businesses the same convenience and profitability that B2C e-commerce brings to end consumers.

The solution that the market needs is that of “open commerce”. This new type of e-commerce model is designed to open up the market and digitize existing traditional supply chains rather than trying to replace them.

He OpenCommerce comes to offer a value point based on the three Cs: Cost, Choice and Convenience. The objective is to create a virtuous cycle of growth between supply and demand, structuring an ecosystem that can scale and generate greater purchasing power for small businesses. Lack of time and assortment options are critical challenges for small merchants. These businesses, typically operated by one or two people, must handle all tasks, from stock replenishment to customer service and payment management, leaving little time to shop around for the best deals or negotiate competitive prices.

The philosophy of open trade focuses on revaluing the supply chain through technology, achieving better prices through greater competition and generating greater purchasing power for small businesses.

I prefer to quote Justin at length, who in an interview with the specialized site CloudTweaks, explained: “We’re saying, ‘We have hundreds of thousands, if not millions, of retailers who want to buy everything from baby powder to Kellogg’s cornflakes.’ With that purchasing power, you’ll be able to offer your products through our platform. You can offer better discounts and conditions to those retailers than ever before. The reason is that you are dealing through one platform with many, which makes your life much easier as a producer. When you say that to a manufacturer, whether it is the CEO of. a big corporation in New York or a small manufacturer in Ohio that makes baby cookies, they love the sound of it. Even better, we’re allowing these manufacturers – which is very different from Amazon’s game – access. to the data generated by those retailers. You create two ideal worlds for them. On the one hand, you are giving them all this added retail purchasing power, which makes it much easier for them to sell their products. For them it is almost like a Santa Claus experience. in real life”.

And he continues: “Secondly, we will give you the data on that. You’ll have complete visibility into who buys what, why, when, how and at what price. When you offer this to a consumer goods manufacturer, it’s their second Christmas gift of the day. This solves their biggest current problem: they do not have access to quality data”.

RedCloud is already making this possible with its technology-driven smart open commerce platform that directly connects brands, distributors, retailers and sellers on a single platform. This platform unlocks the supply chain and brings the convenience and efficiency of e-commerce to businesses.

Open commerce allows users to instantly see where inventory is, the prices at which inventory is sold, the demand for that inventory, forecast demand, forecast prices, quantities, and delivery times. Each party has a personalized visual experience: retailers see what they can buy, when, how and where; distributors see what they have in their hands and what needs to come out; and manufacturers see a clear view of the supply chain. This transparency helps reduce losses due to inventory distortions by providing accurate, real-time data for better decision making.

In a context where the number of middle-income consumers globally is projected to increase from 1.5 billion in 2021 to 5 billion in 2025, improving the efficiency of supply chains is increasingly critical. Current limitations result in significant losses: up to $19 trillion in non-digital payments and $1 trillion annually in sales due to out-of-stocks in stores.

Open Commerce is presented as the second generation of electronic commerce, providing small businesses with superior purchasing power and a platform to compete on equal terms. This solution not only improves the efficiency and transparency of the supply chain, but also democratizes access to products and services, benefiting end consumers.

Country General Manager of RedCloud Technology Argentina