This January, Marketlinks Explores the Role of eCommerce in Advancing Development Outcomes
This post was authored by Kati Suominen, Founder and CEO, Nextrade Group and Technical Director, eTrade Alliance.
This January, the Alliance for eTrade Development (“eTrade Alliance”) will be taking over Marketlinks, sharing experiences from its two years of implementation and making the case for why enabling ecommerce should be at the forefront of the development agenda.
As the COVID-19 pandemic kept the world at home, micro, small, and medium-sized enterprises (MSMEs) everywhere turned to digital solutions to reach their customers and keep their companies afloat. Emerging market consumers shopped from online retailers and through chat groups, and used digital tools like e-wallets, at a rate 50% above their pre-COVID-19 levels. In emerging markets, much of this demand is satisfied by small-scale entrepreneurs with unsophisticated digital tools, and who provide services and products better suited to their home markets. With an expected 3 billion emerging market consumers online in 2022, entrepreneurs have a huge opportunity to use ecommerce to build their livelihoods.
For MSMEs in developing countries, there remains a host of challenges in transitioning their businesses online. The eTrade Alliance, along with our 13 private sector partners, tackles barriers to ecommerce by (1) enabling developing country SME through improving their access to low-cost logistics, fast-disbursing working capital, ecommerce talent, and global online platforms; (2) building developing country policymakers’ knowledge and capacity to adopt and negotiate policies and regulations conducive to SMEs’ digital trade; and (3) providing USAID Missions with evidence-based strategies and learning from concrete initiatives. The eTrade Alliance’s work is closely aligned with USAID’s Digital Strategy by working with private sector partners (Mexicana de Venta Online, Cargill, DHL, Element, Etsy, Google, Latin American eCommerce Institute, Mastercard, Paypal, Ringier One Africa Media, UPS, Visa) to strengthen the digital ecosystem and advance progress in communities to enhance economic prosperity.
The diagnostics and operational work conducted through the eTrade Alliance consistently find that developing country MSMEs have already enjoyed important gains from ecommerce in terms of new clients, higher revenues, greater profitability, and new export opportunities. The boom in ecommerce is also creating new opportunities for developing country logistics, financial services, payments, and IT sectors. Furthermore, ecommerce markets, as they start to flourish, attract foreign direct investment into developing countries’ digital services, payments, and logistics sectors. Developing country MSMEs, especially in key markets of Africa and Latin America, are capitalizing on opportunities in the digital economy by prioritizing investments in ecommerce and digital marketing capabilities. Governments are also focused on promoting ecommerce development as a means to promote MSME growth and recovery from COVID-19.
In supporting developing countries' efforts to close the digital divide, the development community must focus on promoting the already rapidly expanding ecommerce markets in the developing world for three main reasons:
- Developing country MSMEs of all sizes and maturity still face significant challenges in starting to sell online and growing their sales, particularly to export markets. Limited ecommerce capabilities, lack of access to fast-disbursing working capital to fulfill online orders, and frictions and costs of international fulfillment and trade compliance are primary challenges. The second blog of this month's series will explore these challenges in depth.
- There are significant challenges in delivering goods at the last mile, particularly in remote and rural areas, where markets are small and more prone to market failures. Small, rural, and remote areas often lack the ecommerce talent, logistics, IT support, financial services, and world-class Internet connections that urban firms enjoy. Just as they have long supported the adoption of Internet connections at the last mile, development partners can help catalyze ecommerce markets in rural and remote areas, working as we do in partnership with the private sector that continues enabling online transactions once the market has been created.
- We consistently find that ecommerce reduces gender disparities. In many markets, women-led firms that engage in ecommerce outperform comparable men-led firms. However, in many markets women continually face challenges hindering their ability to get into business and access technologies. The development community can lower the entry costs for women to start their businesses and shepherd women-led firms to master ecommerce.
Continue to learn more about the eTrade Alliance throughout the month on the Marketlinks platform and social media channels. On January 26th, the eTrade Alliance will co-host a Marketlinks webinar entitled, "Inclusive Digital Transformation for SMEs in Developing Markets: A Conversation with the Alliance for eTrade Development," in which representatives from our private sector partners will provide insight and expertise on the state of ecommerce in emerging markets.