How Covid-19 Indirectly Proliferated the E-Commerce Industry
Whilst economic activity in almost all other areas decelerated, COVID-19 created a sudden and definitive surge in e-commerce, quickening the adoption of online goods and services. E-Commerce’s share of global retail increased 3% between 2019 and 2020 alone, largely due to the increased number of digital products offered by businesses in response to lockdowns becoming the new normal.
According to Isabelle Durant, UNCTAD Acting Secretary-General, those “that were able to ‘go digital’ have helped mitigate the economic downturn caused by the pandemic”, but also sped up a digital transition “that will have lasting impacts on our societies and daily lives – for which not everyone is prepared.
Varying Degrees of Benefit
Research by a number of regulatory bodies has illustrated a strong acceptance of e-commerce across all regions, with emerging economies experiencing the most significant jump. For example, Mercado Libre, an online marketplace in Latin America, sold over twice as many items per day in the second half of 2020 than it did the year prior. African online shopping platform Jumia experienced a similar exponential increase in the first half of 2020.
The online share of retail sales in China grew by 5% between 2019-2020, whilst Kazakhstan witnessed shares in the same area increase from 5% in 2019 to 9.4% in 2020. On top of this, Thailand saw downloads of shopping apps leap 60% in just one week during March 2020.
This growth was not experienced everywhere, however. In many developing countries around the world, consumers and businesses have not been able to capitalise on the e-commerce opportunities that COVID has created. Persistent barriers continue to block this from happening, including costly internet services, an overreliance on cash, lack of consumer faith and poor digital skills amongst both the population and governance.
One of the many challenges of the pandemic is that this discrepancy in the ability to harness the growth of e-commerce initiated by COVID, risks widening the gap between developed and developing countries. The pandemic appears to have only benefited the world’s leading digital platforms almost exclusively.
The result threatens deepening inequalities and a derailment of any progress that could hope to be made towards the UN Sustainable Development goals.
For the most part, short-term responses have been prioritised for the pandemic by governments, though some have begun to address more long-term strategies for recovery. In developing countries this has taken the form of governments stepping in to protect businesses and personal incomes.
For example, Costa Rica’s government initiated a platform for businesses without an online presence to facilitate trade amongst producers of agricultural, meat and fish products with a smartphone app and texting service. Further, Senegal ran an awareness campaign on the benefits e-commerce can offer across to all members of the population to try and increase its use.
Governments need to prioritise national digital readiness so more local businesses can use the digital economy to become producers. Building and enabling an ecosystem that values e-commerce necessitates an alteration to public policy and business practices to improve the digital and trading infrastructure, enable online payments and establish appropriate frameworks for the security of online transactions.
The Future of E-Commerce
In order to identify new routes for the digital economy to take, better dialogue and collaboration is required. One such platform that is doing this is the eTrade for all initiative; run by UNCTAD and currently funded by the Netherlands, Germany and Estonia, the organisation has served as a helpful assistant to developing countries.
It provides a bridge to help them close the gap in knowledge regarding e-commerce opportunities and risks emerging out of the crisis. On top of this, they have additionally highlighted ways to overcome these challenges.
For many businesses, such as LLCs and general partnerships, COVID-19 presented an opportunity to capitalise on the economic surge of the e-commerce industry. Despite this, the potential exponential growth that this surge tempts businesses with appears to almost exclusively be reserved for businesses in developed countries.
Those in developing countries have countless barriers blocking their path to capitalising on this revolution in the way business will be conducted. It is the job of the governments to remove these blocks, both with short and long-term strategies, so that the future of e-commerce can take off.