Soumaya Hamzaoui, Co-Founder and Chief Operating Officer at RedCloud

June Retail Analysis: The greatest shift in the history of commerce is coming

Soumaya Hamzaoui, Co-Founder and Chief Operating Officer at RedCloud, explores the shift toward open commerce and how Web3 and decentralised platforms will be integral to the next phase in a user-controlled Internet.

Since the dawn of time, global commerce has been linked to economic development. From the Silk Road, which connected China and the Far East with the Middle East and Europe, to the rise of e-commerce, exchanging one product for another has had an indelible impact on the world.

However, our current global commerce system is broken. In the digital domain, a small handful of tech giants like Amazon and Facebook continue to exert enormous influence on nearly every aspect of the commerce experience, taking all the cake while leaving millions of sellers struggling to survive.

Of course, this represents but a tiny fraction of overall commerce. The vast majority of the world’s population pay for goods locally in stores, served by 500+ million merchants who are entirely reliant upon vast and sprawling supply chains that haven’t changed since the 1970s. As we’ve seen from the recent news agenda, these inefficient, offline and manually driven supply chains are increasingly vulnerable to external pressures.

The reason most merchants in emerging economies cannot trade digitally is because they’re locked out of the financial system – unbanked and forced to carry on using cash; unable to establish a trading profile and thus prevented from borrowing to invest in their businesses.

For consumer goods manufacturers, this is a disaster, because cash is slow moving and expensive to handle. What’s more, without digital trading, they have no way of knowing who their merchants are, what is being sold or who ends up buying it. They’re disconnected from their merchant base by a complex web of distributors and intermediaries. The largest manufacturers simply have to place bets and distribute products according to their best guess. For everyone, these emerging market opportunities remain largely off limits.

Profound change is therefore necessary because the level of inefficiency in our current commerce ecosystem is unsustainable. We need to fundamentally change the way goods are bought, sold, shipped and distributed around the world. And Open Commerce can help fix this problem.

So what is Open Commerce?
Open Commerce is a movement that is built upon the same principles as the original Open Source movement, which is designed to champion free trade and enact profound, positive change for merchants and retailers of all sizes.

It is best understood within the context of an ongoing, fundamental evolution in the make-up and structure of the Internet – increasingly referred to as Web3.

The Web 2.0 world we’ve lived in these past 15 years has involved individuals and organisations creating content, engaging with one another and buying and selling on centrally controlled platforms. In contrast, Web3 is about moving to decentralised platforms that are open and accessible to all, with no central power dictating and controlling the terms of use or engagement.

While some critics have attempted to dismiss Web3 as an unobtainable utopian vision driven by over-optimistic Blockchain enthusiasts, the move to a decentralised, user-controlled Internet is a broader and more realistic goal inspired by the successes of the Open Source movement. And it’s a move that has gained vital momentum over the past 12 months. For as McKinsey notes, “Being serious about being digital means being serious about Open Source.”

Open Commerce involves the creation of decentralised, trusted digital trading networks open to all manufacturers and merchants, irrespective of size or location.

Within these networks, each merchant is ID-verified and visible to every manufacturer, and vice versa, with the two parties able to agree on pricing and trading terms without outside interference.

For merchants, the incentive is three-fold. Firstly, they gain access to a much wider range of inventory. Secondly, they can start building a digital trading profile for the first time, making it far easier for manufacturers to find them, verify who they are and trade with confidence. Thirdly, once merchants have a trading profile and track record of success, they now have the opportunity to engage with financial services providers, to secure inventory financing or other forms of investment.

For manufacturers, this model is also potentially game changing, providing them with instant access to new local markets and millions of additional merchants inaccessible via their existing supply chains. Further, as products are sold, they get to see the data on how and where products are being sold, a level of granular insight far surpassing their current market intelligence.

Finally, distribution is also democratised, with any local distributor able to pitch for the opportunity to fulfil a trade. This shifts the balance of power away from existing domestic distribution networks – many of which have a stranglehold on all aspects of local distribution. At the same time, it brings down both the cost and time to market for everyone involved because the supply chain is now digitised, paperless and cashless. Best of all, by massively increasing distribution capacity, Open Commerce can lower the cost to consumers while still enabling manufacturers to charge the price they need to operate profitably.

Open Commerce will be one of the key drivers of the Web3 revolution. The more people who participate, the more value it will provide – a pronounced break from the winner-takes-all mentality of the Big Tech era and the creation of a true ‘sell anywhere’ economy.

Scores of progressive technology companies are actively building this technology, recruiting merchants and engaging consumer goods brands and manufacturers. As we’ve seen with countless past tech movements, once there’s sufficient momentum, things tend to happen very quickly indeed.

Granted, the move to Open Commerce will not be achieved overnight. But it’s the only way to put the power back into the hands of retailers and small businesses, allowing them to engage in open, frictionless commerce. Merchants across the world’s fastest-growing markets will be able to connect with global brands directly or via any distributor, allowing them to run their businesses with more confidence and efficiency.

What’s more, for merchants in emerging markets, they can gain more access to more products, improved visibility into what is locally available.

An empowered future
By 2025, more than one billion new merchants could be created to serve the five billion new middle-class consumers in emerging markets, a majority of whom will adopt online commerce. Which model do you think would be better for the world – one where merchants must pay exorbitant fees to reach their customers and live in fear of their businesses vanishing or a frictionless, ‘sell anywhere economy’ that provides economic empowerment to the world’s next billion entrepreneurs, rather than the world’s next entrepreneur billionaire?

The bottom line is that, to date, globalisation has not been good for the little guys, especially in more impoverished areas. Too often, the impact of individual merchants’ and sellers’ struggles has been ignored at a macro-level – and it’s time for a change. With a decentralised approach to commerce, the ‘sell anywhere’ economy can finally become a reality, creating value for hundreds of millions of merchants, while sustainably lowering the cost of consumer goods for all.

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