E-commerce has brought down barriers that until now, were conceived as unsolvable. Distance, language, and cultural differences have been almost completely negated with the emergence of the internet as a tool to sell and buy, communicate and carry out business. The internet has become a bridge between enterprises in small, isolated countries and large audiences across the world, allowing the former to sell their products and services to customers on the other side of the world.
E-commerce has also facilitated the creation of joint ventures and alliances with companies that might have never cooperated before. As a company located in the somewhat remote island of Mauritius, we have developed a global footprint through the formation of strategic alliances with firms in Quito, Oxford, Madrid, Brussels, Switzerland, Nairobi, Phnom Penh and Hanoi, all of which would be inconceivable without online presence. The internet has also opened up completely new sectors in the economy, by creating new markets, services, and business models.
E-commerce benefits go beyond international trade, to also positively impact domestic market growth. Research shows that e-commerce has the potential to reduce trade costs by 65%, in comparison to normal transactions. This is critical considering that for most sectors, micro, small and medium enterprises are unable to penetrate international markets immediately, with the domestic markets serving as a vital stepping stone.
Making e-commerce work for everyone requires revamping the policy environment. Policymakers and regulators should set as a national priority, an overhaul of the enabling environment for their domestic companies to be able to connect and trade with foreign entities, by adopting measures that reflect the unique characteristics of e-commerce trade. Taking for example Lesotho, a small state surrounded by the massive South African Economy, where this year (2019), we conducted an evaluation of the potential role e-commerce could play in boosting the country’s economic growth. Whilst Lesotho is engaging with its larger next-door neighbour through e-commerce, there are a lot of challenges remaining, with lack of street addresses, affordability and a weak regulatory environment being the most challenging ones. The full report can be accessed here.
Key policy changes needed in many countries include innovative solutions. Such changes could include, establishing de minimis import value exemptions, putting in place expedited custom processes for low-value consignments, introducing an addressing system (inexistent in some developing countries) to facilitate the last-mile delivery – or prompt the private sector to adopt technological innovations such as GPS tracking or the solution provided by www.what3words.com, enabling companies to transact in foreign currencies, and increasing awareness and skills in e-commerce.
The greatest benefits can accrue to the most marginalised in trade. In particular, least developed countries (LDCs) and other less advantaged countries, such as landlocked developing countries and small island developing states, are the ones that can comparatively benefit the most from e-commerce, since their economic and geographic situations create higher-than-usual trade barriers. Taking a leaf from the Policymakers’ Handbook on E-Commerce and Digital Trade written by the team at International Economics consulting and published by the Commonwealth Secretariat, we note that LDCs will benefit from capacity building initiatives, and transfer of knowledge that occurs when e-commerce is adopted by a country.
Executing the right strategy is key as numerous challenges remain. A recent report by DHL states that almost 70% of Business-to-Consumer (B2C) and 60% of Business-to-Business (B2B) companies “are still working towards the full implementation of their [e-commerce] strategies”. The report identifies (1) constantly-changing customer expectations, (2) other urgent business priorities, and (3) limitations in existing infrastructure, as the key challenges hampering their ability to fully roll out their e-commerce strategy.
Paul Baker is the Founder and CEO of International Economics Consulting Ltd., based in Mauritius.