If we decide to look up the most potent business trends that have emerged in recent years, the term 'e-commerce' will definitely appear somewhere at the top of the list. From teenagers obsessed with dropshipping through companies engaging in wholesaling to a multitude of subscription services – e-commerce has become an integral part of our society's economic activity. Even though e-commerce already constitutes a considerable part of today's economy, its power is continuously increasing. According to the predictions made by eMarketer, worldwide electronic commerce sales are expected to reach more than $6.5 trillion by 2023.
So, what is it all about?
E-commerce (the abbreviated form of "electronic commerce") is defined as a business model allowing companies and individuals to buy and sell goods or services over the internet.
There are six basic types of e-commerce based on the market segments in which it operates: B2B (Business-to-Business), B2C (Business-to-Consumer), C2C (Consumer-to-Consumer), C2B (Consumer-to-Business), B2A (Business-to-Administration), and C2A (Consumer-to-Administration). Due to the avalanche of technological advancements happening since the beginning of the 21st century, these days, almost every product or service is available online.
Two sides of e-commerce
Obviously, e-commerce has plenty of advantages, amongst which convenience and a vast range of offers rank the highest. It is relatively easy to start and grow an e-commerce business compared to a traditional company. This is mostly because of no need to store products in warehouses. Moreover, initiatives built on this model are easily scalable on the international level. Especially now, in the face of a global pandemic, online activity is thriving at its finest. On the other side, there is a substantial number of e-commerce flaws, including the inability to inspect or try on the product before buying, the lack of instant gratification due to the time necessary for delivery, and the technological risks related to the possible website crashes.
E-commerce and Developing Countries
Right now, you may be wondering what kind of influence e-commerce can have on developing countries? It turns out that e-commerce actually has an enormous potential to advance the progress of emerging economies. One of the finest examples here is the case of Taobao Villages, completely transforming the world's vision of rural China.
Due to the actions of China's e-commerce giant, Alibaba, many Chinese villages have turned into Taobao Villages, significantly engaged in e-commerce activity and equipped in Alibaba's logistics, service, and training. Households located in Taobao Villages tend to "sell both agricultural and non-agricultural products to urban marketers via e-commerce," which constitutes their primary income source.
According to a study conducted by McKinsey Global Institute, their total annual transaction volume reaches "at least RMB 10 million." Additionally, "China's worldwide e-commerce transaction value grew from less than 1% a decade ago to over 40% now, exceeding that of France, Germany, Japan, the UK, and the USA combined."
It is an excellent example of the Fourth Industrial Revolution, which is entering practically every existing space and influencing it with its transforming power. It also shows that shifting from physical to digital commerce does not always require the highest development levels.
As you can see, e-commerce can have a truly beneficial impact on developing countries, helping them advance socially and economically. Nonetheless, it is not all roses and rainbows…
It is essential to be aware that while a substantial number of e-commerce companies have recently surfaced in developing countries, not many of them have managed to experience significant growth. One of the major challenges for the economies in developing countries is providing and ensuring a stable and affordable infrastructure necessary for the development of e-commerce. The lack of a reliable internet connection can successfully burry the finest visions.
Possible threats related to e-commerce
Even though e-commerce is already all about high technology, its automation is one of the main goals set by the vast majority of companies. According to the HfS Research, "worldwide AI and process automation expenditures are expected to grow to $15.4 billion by 2021." Why? Because that would eliminate the risk of human error in the process and significantly increase productivity. But is it a perfect direction to be chosen in all places across the globe?
Technological infrastructure, necessary for advancing e-commerce with the AI, can be accessed only by the most developed countries. They will then get a chance to raise the global standards of online shopping to the point where all developing countries' efforts will become completely uncompetitive.
Does it mean that we should halt technological progress?
Of course not! However, being aware of the beneficial impact e-commerce has on developing countries, we should strive for sustainable growth, enabling these regions to fulfill their potential without losing the game with their more advanced competitors.
This highlights the importance of foreign investors providing developing countries with economic and professional support in growing the e-commerce activity. Their investments and knowledge could give people new growth opportunities and completely transform entire countries.
As Dr. Kituyi, the Secretary-General of the United Nations Conference on Trade and Development, stated during the meeting in Geneva, "What matters most is not whether the digital economy is booming but where this growth is taking place and whether it is improving the lives of those most in need."
Comments