25h8. Reengineering of markets. Step 1: cooperation and social commerce

08.04.2018 21:59

     Historically, the market has started from the barter. Back then, the main added value was the actual opportunity to exchange a product P1 for a product P2. Later people invented money and product exchange became flexible: P1 = M (money) = P2 + P3 + …. Then later it has helped to develop the production and trade.

       The formula of product circulation P – M – P explains the formula of money circulation M – P – M. Obviously, the process of the circulation of M – P – M would be totally absurd and worthless, if it represented only the roundabout for the certain money supply to be exchanged for the same money supply. Being in circulation in order to receive added value, money started to execute the function of a capital: M1 – P – M2, where M2 > M1.

So, trade has created the background for the development of production and growth of capital: C (capital)* = M2 - M1.

     The development of markets has encouraged the development of market infrastructure and the specialization of the participants of market relations: the first side was producing benefits, the second side was trading, the third was providing the keeping services, the fourth side was providing the transportation, etc. There were also local markets, those that were organized at the specific territory, and global ones, the markets between the nations. The migration of benefits was filling the markets with alternative goods, and the growth of production was encouraging the development of competition. Later the product exchanges have appeared, that helped to form global market prices, so called price quotes.

       With the development of science and technology, people received the opportunity to connect from the distance. This type of communication allowed to do deals without the need to move through the territory or time. It has helped the reduction of the role of exchange business in the total product exchange. The market was filled by the intermediaries who had information on where to purchase a product and where to sell it with a profit.

       In the result of the competition, the part of intermediaries became unreplaceable participants of market relations, since they were performing some functions with the better quality due to their specialization and for the less money. However, the large part of intermediaries has grown into markets due to unique connections and contacts.

     The appearance of large production and the participation of governmental capital at the economic processes has increased the role of insiders and created the background for the corruption and strengthened the positions of intermediaries.

       Investment attraction of the capital has reduced significantly since the main part of added value started to end up in the hands of excessive intermediaries.

       Among anti-market factors the expansion of large corporation occupies significant place. Very often it comes together with its monopoly influence for prices in the region of activity and it does not allow the small and medium enterprises (SME) to enter the real markets. One of the main problems lies in the expenses for the logistics in order to overcome the perimeter of monopoly influence of a large neighbor. But the most important problem for SME is the inability to become a full-scaled market participant, since there is only one buyer at the local market – the corporations present at the region and there is not enough demand for urgent contracts at the global markets. The exit for the final consumer via retail becomes almost impossible for the small businesses…

       With the development of technology the instruments of public promotion of goods and services have appeared, that has positively influenced the market environment. But, as said, there is no limit to a perfection and the devil is hiding in the details: the development of e-commerce led to the concentration of supply and demand via many various platforms (trading platforms, marketplaces…) and individual company websites. As the result, we have received very low competition and big amplitude among the supply & demand of the offers.

     How to clean up the market from excessive intermediaries, to eliminate the corruption, to build direct sales for SME, to create real-time market and to increase the effectiveness of capital turnover? Here we also have a big question such as what is more effective in order to achieve market balance and effective usage of the capital: stock exchange instruments or chaotic e-commerce?

      The answer is obvious: organized e-commerce based on the principles of exchange trade that will have active participants such as consumers, but also the representatives of the related business: carriers, logistics representatives, intermediaries, brokers, financial companies, insurance companies, consulting companies, retail representatives, traders at the markets, individuals, etc. Such system will allow the points of crossing of supply and demand and also will allow the “distance” that is needed to meet the crossing point: reduce the price, change the conditions of delivery and payment, change the basis of supply and take over transport expenses and it will also decrease the transaction costs.

      It makes sense to start with:

     1. To create the path from SME to the final consumer and vice versa. 

     2. Bring SME to real markets via cooperation.

     3. Clean the market from excessive intermediaries. 

     4. Minimize transaction costs.

      What we need to do: 

      1. Create smart-communication environment for individuals & SME. 

   2. Introduce the instrument to individuals in order to participate in social commerce: joint purchases directly from the producer. 

  3. Introduce the instrument to SME for the search of partners and cooperation: consumer cooperation will allow to purchase means of production through wholesale prices, and for the partner associations it will allow to conduct deals at express markets. 

     4. Integrate the system with other e-commerce platforms. 

     5. Attract large corporate business into the system for open market relations. 

     6. Build targeting and system of purchases/sales in the real-time mode.

      25h8.com is the global network that combines the common interests, minimizes the journey from a producer to a final consumer and forms 'live markets’.

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