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E-commerce as great equalizer

/ 01:17 AM October 28, 2016

Once upon a time, you had to be big to export. Transnationals and big companies with access to international marketing and logistics networks had the inherent edge. If you’re a small business, you had to content yourself with selling domestically, mainly to your immediate community and surrounding areas. With limited reach, there wasn’t much scope for growth in a domestic market hampered by relatively low purchasing power. As such, you were likely to remain small, and stories of small enterprises transforming into medium ones, and medium ones expanding into large ones, were extremely rare.

The internet has changed all that. Now, one person with online access can do business from her bedroom and sell to buyers across the world. I’ve seen my daughter sell clothes she had gotten tired of almost as fast as she could post photos of them on social media. The same gadget she took photos of the items with is the same gadget with which she reached buyers. She would send them out via an accessible logistics provider, and the items would be with the buyer within days.

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For those who want to go into serious business, it doesn’t take much more than that. For a small manufacturer or trader, electronic commerce platforms—including familiar ones like Alibaba, Amazon, e-Bay, Lazada, and home-grown Sulit.com—now make it even easier to reach buyers, practically anywhere in the world. Many a retail business now needs no physical store space. Shopping malls are dying in some countries because many people no longer do legwork to shop. Total retail sales are projected to top $22 trillion this year worldwide. Of this, online retail sales of products and services ordered via the internet using any device will reach nearly $2 trillion, or close to one-tenth. Online sales are projected to grow nearly four times faster (23.7 percent) this year than overall retail growth (6 percent), and are forecast to double to over $4 trillion by 2020, or in just four years.

The Asia-Pacific, now acknowledged as the fulcrum of the global economy, has become the world’s largest retail e-commerce market, with sales projected to top $1 trillion this year, and to nearly triple to $2.7 trillion by 2020. China accounts for the bulk ($899 billion this year). But in Southeast Asia—now the world’s seventh-largest economy as a regional bloc, and projected to be fourth largest by 2020—e-commerce still represents only a small fraction of total retail sales. The Asean-6 (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) account for under one percent of global online retail, even as they account for 3-4 percent of global GDP and around 8 percent of world population. Partly behind this is that internet usage in Asean, at 44 percent of total population, is still lower than the global average of 49 percent, ranging from as low as 2.5 percent in Myanmar to as high as 82.5 percent in Singapore (the Philippines has 43.5 percent). Other impediments are inadequate infrastructure and legal framework for digital payments, and a weak logistics system. Asean still has much homework to do on e-commerce, and as chair and host of Asean next year, we can make the needed push.

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E-commerce is indeed a potent tool for empowering micro, small and medium enterprises (MSMEs). Apart from widening access to worldwide markets, it also widens their sourcing options for inputs. No longer need they be confined to local (and often more costly) sources of raw materials and other inputs, if e-commerce makes it as easy to bring them in from abroad, especially as free trade agreements allow them in duty-free. Trade facilitation plays a key role here as well. The increase in de minimis level (shipment value below which customs duties need not apply) from P10 to P10,000 under the new Customs Modernization and Tariff Act is a key shot-in-the-arm for MSMEs, for example.

With the right policy, legal and institutional support, e-commerce could help MSMEs boost their overall contribution to the economy in terms of output, exports and employment. It could well be the great equalizer among enterprises, big or small.

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TAGS: business, e-commerce, internet, MSMEs
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