E-commerce is e-merging

By Edward W. Mandel

A colleague of mine at IOU.io recently told me a story about his expat assignment in South Africa. This was in the early 2000s when he, as an American, thought he was pretty special because he had a cell phone.

“Yes, the iPhone had already been invented, but only full-on techno-geeks thought they were worth the price or the wait,” he said. “I had my new Nokia flip phone, which made me feel like I was Captain Kirk with his ‘communicator’.”

And then the multinational he was working for sent him to Johannesburg.

“One of the first things I noticed when I was walking along the street was that I had the lowest-tech phone in sight,” my colleague recounted. “As I got acquainted with some of the locals, I’d ask for their home phone numbers — and more than one didn’t understand the question.”

What was happening at the time was that South Africa and much of the rest of the developing world had adopted smartphone technology far more quickly than the hard-currency world because both landline phones and laptop computers had passed them by. They didn’t have to unlearn any habits or write off any sunk costs. So they leapfrogged straight past western Europe and North America and grabbed the latest technology with both hands.

“Majority rule was barely a decade old at the time,” my colleague told me. “The black middle class, which had been repressed under Apartheid, was growing at an exponential rate and apparently one of the first purchases for a newly enfranchised businessperson was typically a smartphone. I met people only a generation or two removed from an essentially Iron Age lifestyle who were teaching me how to use apps on their phones.”

The same thing is happening now in ecommerce in general and in blockchain-enabled ecommerce applications specifically. Here’s what some very smart people predict about the growth of ecommerce in emerging markets — and how IOU’s business strategists intend to play into the trends.

A $4 trillion market

I’m not as clever as the folks at Boston Consulting Group, so I’m just going to take their word for a few things:

· From a 2017 baseline of 2.1 billion internet users in the developing world, their ranks will swell to 3 billion by 2022. That’s compared to a steady state of only about 1 billion in developed markets.

· The gap between rich and poor countries is shrinking. Emerging markets’ share of the world’s economy has more than doubled so far this millennium.

· Having leapfrogged past the developed economies in terms of smartphone use, the emerging markets have almost fully caught up in terms of the ubiquity of high-speed data networks.

· Ecommerce accounts for 15% of all retail in the emerging markets, and is only going to grow from here. (In my previous post in this space, I reported that ecommerce accounts for only about 5% of all retail in the U.S.)

· To put a hard number to it, emerging markets’ ecommerce totaled $800 billion in 2017, or roughly 44% of all commerce influenced by online exposure. That is, people very often research products online, maybe print out a coupon, but end up buying something at a physical point of sale. I’m extrapolating on BCG’s data here but, if online-influenced purchases rise to the project $4 trillion in 2022, then ecommerce would reach $1.7 trillion in that time. And that’s if it stays at the current 44%. It’s not hard to imagine a scenario where it crosses the $2 trillion mark.

Of course, each emerging economy is a distinctive and generalities aren’t always helpful. Fortunately, BCG’s report focuses separate lenses on nine different markets, showing how ecommerce habits diverge. For example, that ecommerce-to-digitally-influenced ratio isn’t a static 44% across borders. Digitally influenced channels account for between 35% and 39% of retail in China and Brazil, the two biggest economies studied. A Chinese consumer, though, is four times as likely to click through to checkout than the Brazilian, who is more likely to pick up the purchase locally.

Source: Boston Consulting Group

Also, we have to bear in mind that ecommerce adoption is a moving target, especially in rapidly growing economies.

“Countries can advance through the maturity stages quickly,” according to the BCG report. “Five years ago, India, Indonesia and China were all at early stages … But five-year average growth rates for e-retail in these countries (59% in India, 32% in Indonesia and 46% in China) have pushed each of them into a more advanced stage of digital maturity.”

It’s only good news if you can use it

IOU.io team is looking to bring merchants and consumers into a high-speed, online, peer-to-peer market with few intermediaries, strong protections for your privacy and unsurpassed data security. If BCG tells us that the bulk of our new clientele come from emerging markets, then we’re going to follow that lead.

Specifically, we’re going to:

· Take what we know about the drivers of ecommerce adoption and develop tactics to leverage that knowledge. Women as a share of the workforce, relative size of the middle class, percentage of banked vs. unbanked populations, physical infrastructure for “last-mile” delivery and several other factors determine the likelihood of success in any given city, no less any given country. IOU will customize its approach by market to solve local problems.

· Be selective about recruiting merchants by product category. Generally speaking, air travel, clothing and fresh food seem to be the hot categories right now — but not everywhere, and the list is bound to change over time. We will also examine computers, appliances, baby care, financial services and other items in the consumer basket for suitability on our platform and use machine learning to channel them into markets where they’re most likely to be successful.

· Boost the signal for IOU merchants, as well as the platform in general. Social media is just the start. Search-engine optimization is good when it works, but it’s not enough either. We will use all sources of consumer influence available to present IOU as the most convenient, least pricey, highest variety, thoroughly trusted shopping experience to be had — online or otherwise.

In short, we will be in the forefront of the consumer-led business model. This will enable us to use branding to target merchandise to those who would most value it, provide a personalized sales experience, and engage the customer before, during and after the sale.

I’m sure I’m not the only one telling you this, though. Everybody with an ecommerce site — or who will still have one a year from now — is probably thinking along similar lines.

So I wouldn’t be wasting either of our time if we were just following the pack. What makes IOU unique is the payment processing, which goes beyond anything that anyone else is working on now.

Essentially, we will treat each consumer and each vendor as a sovereign citizen. After an initial screening to ensure that their creditworthiness — not necessarily their history, which might be scant, but the degree to which they can be trusted going forward — is up to platform standards, they can exchange their personal notes for goods and services. A promissory note you receive from one IOU participant can be used to pay another. If this sounds like a stretch, just remember it’s exactly what we all do when we pay for something with a credit card.

Just as those emerging markets bypassed computers and landlines to leap straight into smartphones, billions of consumers could very well leap past Mastercard and Visa and exchange their debt peer-to-peer. And IOU could be the first place that enables them to do that.

Edward W. Mandel is a strategic advisor for IOU.io , he is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and ICO projects and recently launched his own BQT.io P2P Hedge Exchange helping traders connect with each other to leverage their crypto assets.

IOU is a blockchain-based peer-to-peer platform designed to unify ecommerce transaction and customer retention processes, incorporating trade-able IOUs. It is currently raising capital through ICO. The platform can be found online at IOU.io and its community on Telegram at https://t.me/IOUCommunity.