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ANALYSIS

E-commerce sales slump in developing countries

MANAMA, November 24, 2020

Even though Covid-19 has pushed more consumers in developing countries to buy online, many e-commerce businesses in these nations have seen a slump in sales, said the United Nations Conference on Trade and Development (UNCTAD) in a new report.

Presenting hard-to-collect data from 23 countries, mainly in Africa and Asia, the research shows a stark divide between the pandemic’s impact on different actors in the digital economy.

While 58% of businesses selling their own products or services online have recorded a drop in monthly revenue, about 64% of third-party marketplaces have seen a spike in sales, according to data collected from over 250 companies, most of which have less than 10 employees.

“We found that wholly digital businesses, especially third-party online marketplaces, have been more resilient during the current crisis,” said Shamika N Sirimanne, UNCTAD’s technology and logistics director.

“Even with growing demand for e-commerce, most businesses have struggled to adapt and scale-up their operations online.”

Despite new, coronavirus-induced opportunities for digital business models, the outlook looks challenging for many of the e-commerce businesses surveyed. Two-thirds reported rising operational costs since the outbreak, and 44% expect to cut their workforce.

E-payments up, but cash on delivery stays on top

The study reports a notable increase in digital financial services in the nations surveyed – predominantly least developed countries (LDCs) – as consumers tried to limit exposure to the virus while paying for food, medicine, health and hygiene products and other goods.

Some 64% of the e-commerce businesses that took part in the study reported an uptake in payments primarily through mobile money, followed by online and mobile banking, credit cards and other digital payment platforms.

Yet cash-on-delivery remains by far the preferred form of payment for e-commerce transactions in LDCs, the survey confirms.

Tackling digital divides still as urgent

The study highlights the range of challenges e-commerce businesses have faced during the pandemic, notably disrupted supply chains, logistical problems arising from restrictions on the movement of people, and high broadband costs.

In LDCs, only 19% of the population use the Internet – compared to 87% in developed countries – and only 40% have access to a high-speed mobile broadband network.

“The existing divides in terms of digital readiness underline the need to accelerate policy reforms and mobilize support to build the capacity of developing countries to leverage e-commerce in their Covid-19 recovery plans” Ms. Sirimanne said.

“Digitalization must be placed at the heart of the development debate,” she added. “The current changes in consumer and business behaviour will have lasting effects when the world economy starts to pick up again.”

Response efforts and recovery plans

Close to half of the survey participants said governments had not prioritized the e-commerce sector sufficiently in their Covid-19 response efforts and recovery plans.

The pandemic has further exposed gaps in policy areas central to improving digital readiness in developing countries, such as weak e-commerce regulatory frameworks and bottlenecks in financing digital entrepreneurs and start-ups.

But the surveyed businesses did acknowledge that some measures taken by the public and private sectors have helped lower hurdles for businesses and consumers to use e-commerce services.

Increased public awareness campaigns on the benefits of e-commerce, more digital skills training opportunities, and reduced e-payment transaction costs were cited as the most impactful.

Most of the surveyed businesses said “a well-defined national e-commerce strategy” should be the top priority for Covid-19 recovery plans. Reduced costs for internet and broadband access, as well as for mobile and other electronic payments were the other measures recommended most. – TradeArabia News Service




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