By Soumaya Hamzaoui, Co-Founder and COO of RedCloud
The current global commerce system is broken. There’s a huge imbalance between the trading capabilities of large online retailers and the small independent traders in developing countries, and that gap is getting even wider by the day.
This is magnified in the ecommerce space, where a handful of big technology firms such as Amazon and Facebook have a complete monopoly of online trading, with Amazon alone accounting for 37.8% of the retail ecommerce market in 2022, according to Statista. At the same time, the millions of small and medium-sized enterprises (SMEs) in emerging economies can’t compete and are left struggling merely to survive.
These large ecommerce platforms have hijacked the supply chain by building their own distribution networks and freezing out millions of distributors and retailers from accessing the goods they need. More importantly, the vital trading data needed to build a more efficient trading system is often locked up and kept away from both brands and distributors, leaving them having to guess how to best distribute their products.
The move to online over the last decade has been accelerated by the pandemic, with retail ecommerce sales projected to reach $8.1 trillion by 2026, therefore it’s vital that businesses in emerging markets are able to access digital trade. But it’s not a level playing field when they are up against these big competitors.
Barriers to adoption
The biggest barrier to entry for small businesses in developing countries accessing ecommerce is the fact that they are locked out of the traditional banking and finance system. Because they don’t have a bank account and are forced to continue using cash to operate, they can’t establish a trading profile and, therefore, are prevented from borrowing the money they need to invest in their business.
Another problem with using cash is that it’s slow-moving and expensive to handle. At a time when these small businesses are having to contend with rising costs and survive on small margins, this is yet another unnecessarily time-consuming expense to deal with.
Because SMEs don’t have access to digital trading, they have no way of knowing who their merchants are, what is being sold and who is buying it. Instead, they have to rely on outdated, inefficient, disconnected and manually-driven supply chains that are increasingly vulnerable to external pressures and shocks.
Added to this is the fact that, due to these markets being relatively new in terms of technology adoption, businesses that operate in them need to be educated on how to use it. There is also scepticism about and reluctance to come on board with the new technology, particularly if they have been operating in a particular way for many years.
Open commerce platform solution
These significant hurdles can be overcome by providing traders with access to an open commerce platform that enables them to bank and trade their goods online. These services range from digitised payments, which eliminate the risks associated with cash handling, such as theft, fraud and financial loss, to real-time data so that they can more effectively forecast demand, manage their inventory and carry out digital marketing campaigns to drive new business.
This greater depth of insight will also enable firms in emerging economies to develop new products and services that best meet their customers’ needs. In addition, it will help them to see how they are performing against their competitors, spot new and emerging trends and developments that may impact their business or industry, and, thus, take appropriate action in response, whether that’s scaling up or focusing on new markets and gaps in the market.
It will also modernise and improve their supply chain efficiency by connecting manufacturers, distributors and merchants, and enabling them to become more visible and trade digitally, anywhere and at any time. That will allow them to be far more flexible and adapt to meet new markets and opportunities.
The role of AI
By leveraging artificial intelligence (AI) in the form of conversational commerce, it makes the merchant’s experience more relevant as well as optimising the distributors’ margins based on demand and stock availability. Moving forward, AI will greatly benefit ecommerce in these emerging markets and developing economies (EMDEs) by redesigning the way it is done to better fit those particular markets.
Small businesses need to leverage the trust that they have already built with their customers over many years in combination with the capabilities of ecommerce to reach their full potential, and maximise their market reach and sales opportunities. Used in tandem, this will enable them to grow their business, while taking new opportunities that come their way.
The current ecommerce system is unsustainable and in need of an urgent overhaul. But by providing SMEs in EMDEs with online access to finance and the trading capabilities they need to succeed, it can be transformed for the better, and to everyone’s benefit.
