E-commerce vs. Open Commerce: Unlocking Revolutionary Solutions to Empower SMBs

What began as a groundbreaking revolution has hit a major roadblock. Traditional e-commerce, once a beacon of endless opportunities for businesses of all sizes, has surged in growth but is increasingly sidelining small and medium-sized businesses (SMBs). 95% of new Amazon sellers fail within their first year, underscoring the formidable challenges these businesses face in today’s competitive landscape. ⁽¹⁾

SMBs play a crucial role in e-commerce, especially on platforms like Amazon, where they accounted for 60% of sales in 2023. ⁽²⁾ The fast-moving consumer goods (FMCG) sector, which represented 63.8% of retail revenue in 2021, ⁽³⁾ underscores the importance of these businesses in the global market. Valued at over $11 trillion in 2023 and expected to grow, the FMCG market is a vital component of the e-commerce ecosystem. ⁽⁴⁾

E-commerce is now undergoing a new revolution, transitioning to Open Commerce. This second generation of e-commerce aims to empower SMBs by addressing the limitations of traditional platforms, promising a more equitable and efficient trading environment.

Low Profit Margins and Unfair Competition: A Hostile Environment for SMBs

Amazon’s dominant position in e-commerce creates significant challenges for SMBs, burdening them with high fees and stringent pricing controls that lead to razor-thin profit margins. Corporate giants in the e-commerce sector often prioritize their profitability, which can inadvertently disadvantage smaller sellers.

While it might be tempting for small companies to choose a marketplace with the lowest barriers to entry, this often results in significant challenges, including restrictive policies and unsustainable financial pressures. SMBs are compelled to comply with platform rules that frequently prioritize overall profitability over fair competition, making it difficult for these businesses to thrive. This environment not only hampers SMB growth but also stifles innovation and diversity within the market, perpetuating a cycle where only the largest players can succeed.

One pressing issue exacerbating this imbalance is the proliferation of counterfeit products within traditional e-commerce platforms. According to research from Michigan State University, in 2022, almost seven in 10 people were deceived into buying counterfeit products online. 39% of these were purchased through e-commerce websites. ⁽⁵⁾

Counterfeiting poses a fundamental problem, with estimates suggesting that the global trade in counterfeit goods ranges from $1.7 trillion to $4.5 trillion annually. American businesses and consumers are particularly vulnerable, with American shoppers accounting for 60% to 80% of all counterfeit goods sold.

This widespread not only undermines legitimate businesses but also erodes consumer trust in brands and online marketplaces. In fact, research from IP and brand protection company IncoPro found that over half of consumers lose trust in a brand after purchasing a counterfeit good online, leading companies like Nike to withdraw from platforms like Amazon. ⁽⁶⁾

In such an environment, it’s nearly impossible for SMBs to thrive. Yet, there’s a beacon of hope on the horizon: Open Commerce, a revolution that aims to pave the way for a more equitable and innovative future.

Open Commerce: The revolution is here

Open Commerce aims to disrupt the issue of counterfeiting by ensuring product authenticity through advanced technology. Such platforms can connect brands, distributors, and local retailers with trusted trading partners, performing extensive due diligence on business entities to help prevent fraud. By managing relationships among these entities, the platform can trace product origins and monitor seller behaviors. Its reporting and anomaly detection AI capabilities enable the system to spot irregularities in product flow, safeguarding SMBs from counterfeit products and protecting their reputations.

AI technology can be used to trace and pinpoint business relationships, reviews and payment data. This deep-tech solution examines every aspect of counterfeiting, rather than just its symptoms, providing a robust defense against future occurrences. For SMBs, the adoption of Open Commerce means enhanced protection against counterfeit products and a level playing field in a market often skewed in favour of larger corporations. By investing in this technology, SMBs can confidently offer genuine, high-quality products to their customers.

Moreover, Open Commerce uses AI to tackle another major issue for SMBs: inventory distortions. AI analyses enormous data sets to identify inconsistencies and anomalies, preventing costly out-of-stock and overstock situations that currently cost retailers $1.77 trillion worldwide. ⁽⁸⁾ By providing real-time insights into inventory levels and potential sales opportunities, AI helps resolve inventory issues, prevent stockouts, and ensure products are where they need to be. For SMBs, this means more efficient operations, better demand forecasting, and reduced financial losses due to mismanaged inventory.

Open Commerce represents a transformative shift in the e-commerce landscape, creating a fairer and more secure trading environment for SMBs. By leveraging advanced technologies like AI, it addresses critical issues such as counterfeiting and inventory distortions, enabling SMBs to thrive. This new era of e-commerce holds the promise of a brighter, more innovative future for both businesses and consumers alike.

References

1. Agency, The Mercato. “Why 95% of New Amazon Sellers Fail within the First Year – and How Not to Be One of Them.” LinkedIn, 8 Apr. 2024, linkedin.com/pulse/why-95-new-amazon-sellers-fail-within-first-year-how-idlse/ .  
2. Babcock, Stephen. “60% of Amazon Sales Are Generated by Third-Party Sellers.” The Current, The Current, 25 May 2023, thecurrent.media/amazon-third-party-sellers.
3. Smith, P. “R6etail Sales Share of the World’s Top Retailers by Product Sector.” Statista, 22 Mar. 2023, statista.com/statistics/266415/revenue-share-of-the-leading-retailers-worldwide-by-product-sector/#:~:text=In%202021%2C%2063.8%20percent%20of,the%20apparel%20and%20accessories%20sector.
4. “The 7 Most Profitable FMCGs for 2023 | Otter.” Tryotter, 28 Sept. 2023, tryotter.com/blog/industry/most-profitable-fmcgs-2023#:~:text=As%20a%20result%20of%20these. Accessed 9 May 2024.
5. “MSU Survey: 7 in 10 Consumers Deceived into Buying Counterfeit Products Online.” MSUToday, 19 Oct. 2023, msutoday.msu.edu/news/2023/msu-survey-7-in-10-consumers-deceived-into-buying-counterfeit-products-online#:~:text=Clothes%20and%20shoes%20%E2%80%94%20the%20most,harmful%20chemicals%20such%20as%20lead
6. Goldstein, Keith. “The Global Impact of Counterfeiting and Solutions to Stop It.” Forbes, 2 Aug. 2022, www.forbes.com/sites/forbesbusinesscouncil/2022/08/02/the-global-impact-of-counterfeiting-and-solutions-to-stop-it/?sh=7512dd981ca2. Accessed 7 June 2024.