The Principles of Open Source Can Help Fix Our Broken Global Commerce System

Open Source Trade

By Justin Floyd, CEO and Founder of RedCloud

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 the ‘sell anywhere’ economy and enact profound, positive change for merchants and retailers of all sizes.

A landscape of inequity and inefficiency 

Profound change is necessary because there are 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.

In 2020, e-retail sales accounted for 18 percent of all retail sales (Statista, July 2021) meaning the vast majority of the world’s population still pays for goods offline in local stores, served by over 500 million merchants reliant upon vast and sprawling supply chains that haven’t changed since the 1970s.

The reason these merchants 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 guess and distribute product accordingly. For everyone else, emerging market opportunities remain largely off limits.

Ultimately, open commerce is needed because this level of inefficiency in our commerce ecosystem is unsustainable. It’s the main reason why consumer goods prices keep on rising, a problem that affects everyone, everywhere.

What is Open Commerce?

Open commerce is best understood within the context of an ongoing evolution in the make-up and structure of the internet – increasingly referred to as Web3.

The Web 2.0 world has involved individuals and organisations creating content, interacting and buying/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 controlling the terms of use.

In the case of open commerce, it 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, the two parties able to agree on pricing and terms without outside interference.

For merchants, the incentive is three-fold. They gain access to a much wider range of inventory, they can start building a digital trading profile for the first time and, once they have this, they can finally engage with financial services providers to grow their businesses.

For manufacturers, they get instant access to new markets and millions of additional merchants inaccessible via their existing supply chains. Further, 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 democratised, with any local distributor able to pitch for the opportunity to fulfil a trade, shifting the balance of power away from existing distribution networks, many of which strangle local competition.

A digitised, paperless and cashless supply chain brings down the cost and time to market for everyone involved. And by massively increasing distribution capacity, open commerce lowers the cost to consumers while still enabling manufacturers to operate profitably.

The movement is already underway. Scores of technology companies are actively building open commerce technology, recruiting merchants and engaging brands and manufacturers. 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.

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.

Firstly, open commerce focuses on digitising existing trading flows, 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 does not require e-commerce to die. 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 e-commerce when these marketplaces fail to deliver value for sellers – for example, where there’s anti-competitive behaviour.

Of course, larger consumer brands and manufacturers may fear the leap into the unknown, not to mention upsetting their longstanding distributors. They may also be worried about their ability to sustain existing volumes in a more competitive marketplace – 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.

This will take time, and in the first instance, open commerce is far more likely to appeal to micro-brands and burgeoning manufacturers, where the current systems are built against them.

Beyond this, there are other structural barriers that will take time to erode, most notably the need for cryptocurrencies to become accepted as a way of paying for bills and products, thus decoupling trade from local economic problems and currency issues. Fortunately, it looks increasingly as though mass acceptance of crypto is now only a matter of time.

An empowered future

To date, globalisation has not been good for the little guys. 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.


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