Why are Public-Private Partnerships Critical for eCommerce Development — and How Can We Improve Them?
This post is the forth in Marketlinks' ecommerce series and is authored by Kati Suominen, Founder and CEO, Nextrade Group and Technical Director, eTrade Alliance. Access the first, second, and third posts.
The Alliance for eTrade Development, a USAID-backed global development alliance, has been working to enable micro, small, and medium-sized enterprises (MSME) ecommerce since 2017. Through its two iterations and five years of implementation, the Alliance exemplifies how public-private partnerships are such a compelling mechanism for enabling MSME ecommerce in emerging economies.
Public and private sectors share a powerful common interest in digitizing small businesses, enabling cross-border ecommerce, and creating new markets. Empowering MSMEs in ecommerce allows private sector partners to deliver social impact and build long-term business opportunities in the fastest-growing areas of world trade. For the development community, fostering entrepreneurship, improving trade, and building new markets in the developing world help attain economic security that may stem outmigration or bolster women’s empowerment, translating into inter-generational wealth transfer and improved health and educational outcomes.
Further, the private sector is on the frontlines of ecommerce markets, regularly encountering hard challenges and new opportunities for small businesses to sell online. As such, the private sector plays a critical role in educating governments and development agencies about needs on the ground, where and how the public sector is needed to help bridge market failures, and ways in which the public sector can optimize its own development interventions to support small business ecommerce. The private sector also sees firsthand the policy challenges endured by firms that sell online and that offer services to sellers, and thus play a crucial role in educating the public sector about digital, trade, and other policies conducive to ecommerce.
Critically, public and private sectors have highly complementary assets and capabilities to promote MSME ecommerce. Governments and development agencies have global networks of offices, relationships with governments, and resources for promoting economic development at the “bottom of the pyramid,” while the private sector has technologies and expertise on business models that enable small businesses to engage in ecommerce. The private sector can, by working with a development agency or a government, accelerate the deployment of technologies at the proverbial last-mile, especially in underserved segments and communities, while the public sector can leverage private sectors’ technology assets and capabilities to enable transactions and markets. The eTrade Alliance’s mandate is to match public and private sector’s respective capabilities in intelligent ways, and to deliver impact in settings where both parties are necessary, but neither is sufficient on its own.
There are also compelling reasons to enable ecommerce development via a multistakeholder alliance, as proven by the eTrade Alliance. The Alliance brings together the “360 degree” capabilities of the private sector through an MSME’s sales cycle, from marketing and sales platforms, to order management capabilities, as well as access to finance to fulfil orders, secure cross-border payments, cross-border shipment, and last-mile delivery, and after-sales service. Each part of the sales cycle is equally important for ecommerce transactions to happen and for MSMEs to progress on their digital journeys, underlining the importance of a coordinating body such as the eTrade Alliance.
As learned from the Alliance’s five years of existence, implementing partners looking to promote ecommerce development can consider five approaches:
First, seeking scalability is essential. Most development projects globally aspire to touch, at best, a hundred MSMEs. Going forward, we need solutions that enable tens and hundreds of thousands of small firms in underserved markets. One important opportunity lies in technologies like AI that enable implementers to overcome perennial tensions between scalability and customization and amid offering MSMES information and taking time from their businesses for it. Rather enable a great many MSMEs to access personalized learning and provide opportunities in doses that support and align with the MSME’s business obligations.
Another important way to scale impact is to enable interoperability among digital platforms, which helps reduce capacity-building needs. For example, an MSME not need have specific training on how to use a new payment platform if it can, with a click of a mouse, make any payment system interoperate with its own bank account. Also needed are fundamental solutions, such as digital identity tools that unlock MSMEs’ access to digital services.
Second, ecommerce is often seen as consisting primarily of business-to-consumer (B2C) transactions of small items. Yet, some of the greatest opportunities for development are in digital services — the fastest-growing segment of world trade. MSMEs that are able to sell digital services online surmount logistics challenges. Firms selling digital knowledge-intensive business services (KIBS) will also enable developing countries to plug into the global and regional digital value chains of corporations that increasingly outsource such services to third parties. Enabling tourism operators to reach customers digitally is another way to empower services ecommerce — a timely solution to help tourism operators recover from Covid-19.
Third, ecommerce development work needs to integrate and include efforts to enhance digital regulations and digitize the broader trade ecosystem (ports, free trade zones, customs, and single windows) through technologies such as blockchain, AI, the Internet of Things, and data-rich business-to-business (B2) payments.
Fourth, development impact needs to be measured better in ecommerce development programs. Attribution can be improved by using control groups as well as econometrics. In programs that onboard firms to marketplaces, shareable data may include tracking clicks per store and product, new visitors, visitors by market, sales by product and markets, and so on.
Fifth, technologies and platforms that enable ecommerce change rapidly. What works today may not be the optimal intervention tomorrow. Implementers will have a responsibility to keep up with trends in markets and think ahead, so that MSMEs are able to leverage the most current and impactful capabilities that generate leads and sales.