Justin Floyd
The principles of Open Source can help fix our broken global commerce system
The greatest shift in the history of commerce is coming. It’s called Open Commerce, and it promises to fundamentally change the way goods are bought, sold, shipped and distributed around the world.
Open Commerce is not a technology. It’s a movement, built upon the same principles as the original Open Source movement, that is designed to champion free trade and enact profound, positive change for merchants and retailers of all sizes.
And it’s a movement being championed by a new breed of like-minded technology companies aiming to break the stranglehold of the preeminent centralised commerce platforms and create a true ‘sell anywhere’ economy.
A landscape of inequity and inefficiency
Profound change is necessary because there are massive and rapidly growing problems across the global commerce ecosystem.
In the digital domain, a small handful of tech giants 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 product according to their best guess. For everyone, these emerging market opportunities remain largely off limits.
Open Commerce is needed because the level of inefficiency in our current commerce ecosystem is unsustainable. It’s the main reason why consumer goods prices keep on rising, a problem that is exacerbating the world’s food security and nutrition crisis – already described by the UN as a ‘humbling reality’.
What is Open Commerce?
Open Commerce 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 like Facebook or Amazon. 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.
If all of this sounds naïve or intangible, think again. Open Commerce is already happening. Scores of progressive technology companies are actively building this technology, recruiting merchants and engaging consumers 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.
Overcoming the barriers to adoption
While Open Commerce requires profound change, the barriers to adopting these new technologies across the global commerce ecosystem could be lower than you think.
As a movement, Open Commerce predominantly focuses on digitising existing trading flows between B2B buyers and sellers, rather than supplanting them. It is about encouraging free trade and meeting unmet market needs, not putting people out of business. There are clear upsides for everyone in the supply chain.
Similarly, the success of the movement is not predicated on the demise of current eCommerce platforms. These marketplaces offer incredible convenience to consumers and can provide a fantastic channel for sellers in specific verticals. Open Commerce will only eat the lunch of eCommerce when these marketplaces fail to deliver value for sellers, potentially providing an antidote to some of the destructive, anti-competitive practices currently seen on these platforms.
That said, the move to Open Commerce and the creation of the ‘sell anywhere’ economy will not be achieved overnight.
Larger consumer brands and manufacturers may fear the leap into the unknown, not to mention upsetting their longstanding distributors. In addition, they may be worried about their ability to sustain existing volumes in a more competitive marketplace – that is, until they realise that, through these networks, they can access markets that are hundreds or even thousands of times bigger than via their existing supply chains.
All of this will take time, and in the first instance, Open Commerce is far more likely to appeal to micro-brands and burgeoning manufacturers, for whom the current systems are built against them.
Beyond this, there are other structural barriers that will take time to erode. Most notable is the need for cryptocurrencies to become more commonly accepted as a way of paying for bills and products. This change is necessary to decouple trade from local economic problems and currency issues. It’s a big ask, and for years such a scenario seemed extremely implausible. Again, however, the past 12 months have confounded critics, with the pace of crypto awareness and adoption accelerating to the point at which mass acceptance is now only a matter of time.
An empowered future
To date, globalisation has not been good for the little guys. Too often, the impact of individual merchants’ and sellers’ struggles has been ignored at a macro-level. But 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.