The coronavirus pandemic is impacting actors in the digital economy differently. While some digital businesses are showing resilience, costs are rising for others, a new UNCTAD survey shows.
Digital businesses have been affected by the COVID-19 crisis to varying degrees with those in poorer nations struggling to bridge the digital divide. / ©Confidence
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, according to an UNCTAD study published on 17 November.
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 between March and July 2020 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.
The report highlights several successful initiatives:
- In Cambodia, the government has passed an e-commerce law to ease the registration of e-commerce businesses.
- In Kiribati, digital solutions implemented to combat the spread of COVID-19 have given fresh impetus to efforts to harness the development gains of ICT and e-commerce.
- In Myanmar, e-commerce and the digital economy are featured in the government’s COVID-19 economic relief plan
- In Rwanda, the Central Bank suspended mobile money fees for three months and waived charges on push and pull services between bank accounts and mobile wallets
- In Senegal, collaboration aimed at onboarding new businesses and supporting local produce providers has proven successful (examples include the e-KomKom and the e-commerce Sénégal platforms)
- In Uganda, e-commerce platforms have been fast to promote contactless payments and logistics and nurture new partnerships with development partners
- In Tunisia, the “label de confiance” initiative has helped build trust across the e-commerce ecosystem
Readiness assessments and national strategies
Most of the surveyed businesses said a “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.
UNCTAD and partners are working with many developing countries to help them put in place relevant measures and strategies.
The countries that took part in the survey have benefited from UNCTAD’s support in devising a national e-commerce strategy or conducting an eTrade readiness assessment, which gives a comprehensive diagnostic of a nation’s ability to benefit from opportunities in the global digital economy.
So far, 27 developing countries, mostly LDCs, have benefited from such an assessment, and the organization is now working with eTrade for all partners to fast-track the implementation of the recommendations, with financial support from the German and Dutch governments.
UNCTAD is also working with partners, including United Nations resident coordinators, to ensure e-commerce is mainstreamed into national development plans and development partners’ cooperation frameworks.