Inside the digital society: COVID-19 and e-commerce
The COVID-19 pandemic has led to an upsurge in electronic commerce, especially 'e-shopping’. That poses opportunities for some but risks increasing inequalities within and between countries. The UN's trade and development agency UNCTAD has been working with a range of partners for the last few years to break down barriers to e-commerce in Africa and elsewhere. It worked with the UN's Regional Commissions and the German Konrad Adenauer Stiftung to assess what is happening and update its guidance on how businesses and governments can seize the opportunities and avoid the risks. David Souter and Anri van der Spuy were the lead consultants for its new flagship report, Covid-19 and E-Commerce: Global Review. In this piece, they summarise the findings.
OVID-19 has been one of the themes of the last year in the development of a digital society. And the accelerated growth of e-commerce, especially e-shopping, has been one of the themes of COVID’s relationship with digital. What’s been happening, what’s the likely impact and, as always, who are likely to be winners and losers in this part of the digital ecosystem?
Like most things digital, e-commerce is more complicated than it seems. Some services (like accountancy) and goods (like music) can be traded in digital form. Some (like taxi services) have been changed by digital business models. Others must be traded physically but can be ordered digitally, facilitated by digital platforms, transactions and regulation.
E-commerce includes exports as well as domestic retail (or what we call e-shopping). Global platforms play a major part, but individual businesses can be successful too.
That e-commerce is growing’s indisputable, but stats are problematic. UNCTAD’s estimates of the global digital economy as a whole range from 5% to 15% of global GDP. Transition’s spread unevenly: there’s more international e-commerce and more online shopping in more digitalised developed countries than in much of the global South.
Impact of COVID
And COVID has accelerated the upward trend. It’s seen economic activity as a whole turn down, domestically and internationally, but the share made up of digital transactions has increased in every region. E-shopping’s enabled some businesses with the right resources to maintain or expand sales, and consumers with the right resources to maintain purchases and lifestyles, during the pandemic.
Where one of us lives, for example, food wholesalers who normally supply restaurants and local universities have turned to online deliveries, on their own or in small business partnerships. Innovative marketing has often been a key. An example (though we usually avoid such anecdotes): one cheesemonger selling artisan cheeses in Britain, hit by losing restaurant trade, has made a big success of online cheese tastings which have enabled its survival and built a new national customer base.
So will the gear shift that we’ve seen towards e-shopping be maintained after pandemic? Evidence that UNCTAD and its partners have gathered from businesses and consumers suggests it will, at least to some degree. The pandemic’s accelerated the pace of e-commerce expansion, and that isn’t going to shrink again when/if normalcy returns.
But the impact isn’t equal everywhere. Digitalisation’s increased efficiency and enabled those with the right resources to build businesses or maintain their quality of life, but it’s also concentrated the power of some large businesses – there’ve been big winners, including Amazon – and emphasised the significance of inequalities in income, connectivity, capabilities and governance.
Enabling (the value from) e-commerce in developing countries
Enabling more equitable outcomes from digitalisation is the core goal of the eTrade for all partnership that sponsored the report that we’ve been working on. ‘E-commerce,’ thinks that partnership, ‘has great potential for diversifying … trade opportunities for developing countries and expanding the range of both established businesses and new enterprises.’ It plays a growing part across the board in business.
But, eTrade for all continues, its growth is inhibited in many countries by a range of barriers. ‘Countries that overcome these barriers and establish enabling frameworks for e-commerce will be better placed to leverage its potential benefits … while those that fail to do so risk becoming less dynamic at home and less competitive abroad.’
So what are those barriers and have they also been intensified by COVID?
UNCTAD and eTrade for all partners have been carrying out e-trade readiness assessments in developing countries, particularly Least Developed Countries, to help answer that question. No space for details here but you can find more in the report. In brief, they see the need for attention by governments and other stakeholders to eight ‘key’ areas:
- developing national strategies for e-commerce development, including betterxstatistics, better analysis and more coordination within government;
- improving infrastructure, information services and business portals;
- enabling electronic payment systems;
- improving (and, where appropriate, digitising) postal services, transport and tradexlogistics to smoothe transit, accelerate delivery and reduce costs;
- establishing effective legal and regulatory frameworks in areas including electronic transactions, cybersecurity, data privacy, consumer protection and the standardisation of export requirements;
- building digital and e-commerce skills of enterprises and consumers;
- improving access to finance for innovative businesses and business models;
- and empowering women, who have experienced additional barriers to establishing digital enterprises.
Has COVID changed these barriers and goals? In substance no, but in importance yes. They have become more urgent, particularly in countries that already lag behind. The new report gives examples of what's been done in certain countries, and suggests what should be done where it has not.
eTrade for all’s prescriptions
What are eTrade for all’s prescriptions, then, for addressing these barriers whose importance has been emphasised by COVID? Here’s how we would summarise them.
Businesses, clearly, need to respond to the challenges presented by e-commerce.
New businesses can step into niches it creates. Their ability to do so will depend on factors like the ease of establishing new businesses and securing investment for unfamiliar business models from cautious finance houses, and the availability of skills in digital business (not just digital or business skills).
But economic prosperity cannot be built on new businesses alone. Established businesses, which represent the large majority of activity, need to respond to both challenges and opportunities – building their digital capabilities, their capacity to trade online as well as offline, understanding what their customers and business partners want from them in a digital environment and delivering on those desires.
Governments, equally clearly, need to facilitate this innovation and adaptation in order to ‘enable local businesses to participate effectively in the evolving economic landscape and avoid falling further behind competitors from countries where these opportunities are being more thoroughly addressed.’
How? By addressing the barriers identified above. Which will require:
- ‘systematic data gathering and evaluation of the impact of policies and business practices;’
- ‘identification of critical gaps that require intervention;’
- ‘establishing/developing strategies for e-commerce that are integrated into broader national development;’
- ‘fostering multi-stakeholder dialogue and strengthening … inter-ministerial dialogue …;’
- and facilitating partnerships between government and business to build trust in e-commerce among merchants and consumers.
International cooperation’s also going to be important – in the tortuous world of international trade negotiations, in commercial and digital standardisation, in the governance of data, and in development finance. (The eTrade for all partnership provides relevant support and expertise.)
Some further thoughts
This is an important report on an important issue. It also highlights the relationship between digitalisation of the economy and the broader emergence of a digital society. We’ll end with three thoughts about those broader implications that need policy attention, building on the work in the report and elsewhere.
The relationship between non-digital and digital
Digitalisation is increasingly pervasive in economic life, particularly transactions between businesses, but it’s not the only driving force. It’s a way of facilitating transactions and border crossings, of managing supply against demand, not a substitute for them. E-shopping still accounts for a relatively small minority of retail, especially in developing countries. It suits some products more than others, some much more, some a good deal less. And shopping’s never been solely about transactions, it’s also about human interactions, a social experience.
We’re in a transition here, but it won’t be a complete transition. We’ll see a shifting mix of online and offline interactions and transactions. Managing that mix, though, will not be easy for two reasons:
There will be winners and losers
All digital (and other) economic transformations have winners and losers. Which is which results as much from existing social differences as from the transformation itself. One of us comes from one of the world’s most unequal countries (South Africa), where digital inequalities risk exacerbating longstanding social and economic inequalities. The other grew up in a part of Britain that still suffers disadvantage from the loss of its main industries (coalmining, steelmaking, shipbuilding) over a generation back.
Thinking about digital innovation often focuses on how we can enable winners. That’s important, but so are mitigating losses and protecting losers. The economics of digitalisation currently favours global platforms over local, bigger companies over small, those with access to finance capital that can service debt over those without. Some businesses – large and small – will succeed through e-commerce and others fail. Strategies to manage evolving digital e-commerce need to address the needs of those who lose as well as those who win.
Broader social and economic impacts
The move towards e-commerce has wider social and economic implications. Policy responses to it also need to deal with more than commerce. Space is short, so two examples.
Governments and societies rely on taxes to provide public services. Global platforms have enthusiastically avoided them. Governments have struggled to find ways of taxing online and offline activity equitably. That needs to be resolved if economic digitalisation is not to risk poorer public services or higher personal taxation, even where it enables economic growth.
The increased share of retail taken by online businesses affects the viability of those offline. COVID lockdowns have put the survival of many offline retail businesses in question. Revitalising urban centres after COVID will be difficult, especially if return to office work is only partial. Successful high streets and shopping malls are an important part of safe and cohesive communities; failing ones the opposite. A strategy to build online activity needs to include a strategy for dealing with its impact on offline activity.
E-commerce is increasingly important. COVID-19 has accelerated this. UNCTAD’s and eTrade for all’s Global Review’s a valuable new resource for understanding what is happening and sets out necessary measures that can help unlock the value of e-commerce and reduce the risk that some will lag behind.
Without such measures, digital developments, e-commerce included, could exacerbate both social and digital inequalities. These broader impacts, therefore, also need to be considered by national governments and international agencies.
The opinions expressed in this article are those of the author(s) and do not necessarily reflect the views of SAIIA.
This article was first published by the Association for Progressive Communications (APC).
(Image: Dieter Spannknebel/Getty Images)