The evolution of Electronic Commerce or E-Commerce has brought about a significant change in the way business is conducted across the globe. The invention of the smartphone and mobile-based shopping applications and social media sites such as Facebook has facilitated the electronic sale and purchase of goods and services to the remote areas of the world.
The e-commerce which emerged during early 2000 in the United States and other developed parts of the world has expanded to almost all the developing countries by now. Developing countries like India, Brazil, and Indonesia have provided a fertile ground for the growth of this sector and even surpassed many developed countries in terms of market size. Various home-grown websites offering online sale and purchases have emerged in a number of developing countries and many of them are successfully competing with their multinational competitors.
E-commerce and Developing Countries
Developing countries of different regions are embracing the e-commerce sector and also developing the necessary infrastructure to support the growth of this sector. Africa is investing in 3G mobile network and subsidizing smartphone ownership. The digital payment system is also expanding at a very fast pace. Around 65 percent of online buyers in Africa prefer to use a digital method of payment. E-commerce companies are developing their infrastructure and spreading awareness among consumers. Special mobile applications are being developed to make the browsing experience easy and simple.
Southeast Asian countries are also leveraging the modern technology for the betterment of their citizens. Singapore has the highest per capita e-commerce spending, with more than three times the e-commerce spending in Thailand, and m-commerce spending more than eight times that of Malaysia. As for Indonesia, while per capita spending is low, it is expected to soon become the third-biggest e-commerce market in Southeast Asia. E-commerce is heavily cross-border in some countries in the Southeast Asian region – 55% in Singapore and 40% in Malaysia are cross-border.
Development in South Asia
Among the South Asian countries, India emerged as one of the biggest markets with a size of around US $ 20 billion for e-commerce companies. Many domestic start-up firms have also emerged in this region and are performing very well in the sector. Flipkart, Amazon, and Snapdeal control the majority share in the Indian online market.
The e-commerce market in Pakistan is served mainly by international giants like Alibaba and Daraz. A young generation with 65 percent below the age of 30 and technical knowledge and increasing internet penetration has brought about a revolution in the shopping behavior in Pakistan.
Consumers in Bangladesh rely more on the social media website facebook.com for their online shopping needs. The e-commerce Association of Bangladesh (e-Cab), the trade body for e-commerce in Bangladesh, estimates that there are 700 e-commerce sites and around 8,000 e-commerce pages on Facebook in 2017. The major e-commerce players in Bangladesh are Daraz Bangladesh, bikroy.com, clickbd.com and bagdoom.com.
The Sri Lankan market is dominated by companies like Kapruka.com, Daraz.lk, WOW.lk, Takas.lk, and MyDeal.lk. It is worth noting that, apart from Daraz, all others are home-grown companies and all are operating in the business-to-consumer format. Currently, there are no business-to-business e-commerce websites operating in Sri Lanka. Also, global e-commerce players such as Amazon or Alibaba are absent from the Sri Lankan e-commerce sector.
Nepal stands behind its neighboring countries in welcoming the e-commerce sector. Only a handful of players operate in Nepal in the online space. The Nepalese are not allowed to import goods online. However, various indicators that facilitate the growth of online sales are performing modestly in Nepal.
Major Indicators of E-commerce Industry in South Asian Countries
Both mobile and internet penetration in these countries are found to be remarkable. Countries like Sri Lanka and Nepal have crossed the 100 percent mobile penetration rate which means they have more mobile connections than their population. South Asian countries have very low mobile and broadband costs which make them highly affordable for their citizens and this has possibly led to the high mobile penetration rate. Though the use of plastic money is comparatively low it is expanding very fast. This low use of plastic or digital money has made the cash on delivery prominent in the e-commerce sector in South Asia and only a limited number of consumers prefer digital transaction. The low ratio of mobile phone users to credit card holders in the region offers a huge scope for digital transaction and great opportunity for debit and credit card providers to explore the market.
The Major Differences
There exist a lot of differences in the e-commerce market in South Asian countries. One such major difference is control of the market. Apart from India and to some extent Sri Lanka all other markets are controlled by foreign players. Another difference noticed is allowing foreign direct investment (FDI) in the B2B (business-to-business) format of e-commerce. Unlike others, India does not allow FDI in the B2B format of e-commerce. In addition, the market size measured in terms of volume of the sale reveals that India accounts for around 99 percent of the total e-commerce sales in the region.
A recent study by GSMA finds a gender gap of 26 percent in mobile ownership in the South Asian region compared to a global gap of only 10 percent. This gap is even higher compared to Sub-Saharan Africa’s of 14 percent. The gender gap is 23, 33 and 45 percent in India, Bangladesh and Pakistan respectively. It is only 6 percent in Sri Lanka and 19 percent in Nepal.
The gender gap in mobile internet usage in the region is also extremely wide at 70 percent compared to a global gap of 26 percent and 4 percent in the Latin American & Caribbean region and 34 percent in the Sub-Saharan African region. The same gap is 68 percent in India while 63 percent in both Pakistan and Bangladesh. In Sri Lanka only 25 percent of women have the internet access.
All the South Asian countries also have huge differences in the usage of mobile and internet in rural and urban areas as well. A recent study points out that the rural and urban poor gap in mobile phone ownership in India is 22 percent, 5 percent in Pakistan, 7 percent in Bangladesh and 15 percent in Nepal. The gender gap in internet usage is 14 percent in urban India while 27 percent in rural areas. Pakistan has 40 and 49 percent gender gap in internet usage in urban and rural areas respectively. All these data clearly reflect the digital gap between male-female and urban and rural areas in South Asian countries. The patriarchist society and low level of employment among the females are possibly the reasons behind this digital gap.
Although there has been a significant growth in this sector in the South Asian region, still it has a way to go. Growth rate among these countries varies largely. India with its advanced technology and bigger and matured market has been able to grow very fast and wide, while others are way behind. Internet speed is far from a satisfactory level in the region and it acts as an impediment for the e-commerce sector. The gender disparity and urban-rural gap in the use of internet and mobile is another area of concern and it needs to be addressed urgently. Even after so many years of growth none of the South Asian countries have any comprehensive policy to regulate the industry and safeguard the interests of buyers and sellers.
Much work is needed to be done in strengthening the digital infrastructure especially in smaller countries like Nepal and Sri Lanka. Regional integration of digital infrastructure can immensely help to overcome this challenge. Consumers should be encouraged to use more digital modes like credit and debit cards, and digital wallets for their online transactions. This will not only help nations to move digitally ahead but also reduce the cost burden from the e-commerce players as their payment will not be blocked for a longer period.
How is this affecting the electronics industry?
Electronics manufacturers anticipate at least a five-week product shipment delay from suppliers due to the coronavirus epidemic, according to a survey conducted by IPC, a global electronics manufacturing association. The group says shipping delays from China and other countries where the virus has spread are already having negative impacts on manufacturers. Roughly 65 percent of manufacturers report their suppliers expect, on average, a three-week delay. However, electronics manufacturers expect delays to be longer than what their suppliers are currently quoting. On average, executives expect shipment delays to be at least five weeks.
“The delays will likely have ripple effects for the rest of the year,” said John Mitchell, IPC’s president and CEO. “The longer China is affected by the epidemic, and the more it spreads to other parts of the world, the supply chain will experience more and varied strains and disruptions.”
The virus is not only affecting companies within the industry, but also events. SEMICON Southeast Asia 2020 has been postponed from 12-14 May 2020 to 11-13 August 2020 due to concern surrounding the virus. “After close consultation with our stakeholders, which include partners, exhibitors, industry peers and the general community, we have made the necessary decision to postpone SEMICON Southeast Asia 2020,” said Bee Bee Ng, president of SEMI Southeast Asia.
How is the virus affecting the global economy?
The virus has already caused many knock-on effects for the global economy. From lengthy manufacturing time frames to fewer sales, there is global fear of the economy slowing down to a halt. According to City A.M, Bank of England governor Mark Carney has said the economic shock from coronavirus “could prove large” but sought to reassure the public that it will “ultimately be temporary”. Economic Times estimated that coronavirus could cost the world $1 trillion. The worrying prospect that the COVID-19 outbreak could become the first truly disruptive pandemic of the globalization era is renewing doubts over the stability of the world economy.
Many workers are already facing disruptions to their daily routines as schools, companies and local governments implement precautions to curb the coronavirus outbreak. Already, many organizations have restricted travel along with home based working arrangements.
On the 11th March, Trump stated that he has suspended all travel from Europe to the US – excluding the UK. The travel ban has caused a huge plunge in the markets. Not only this, Wall Street is heading for another slump too – trading in futures contracts have been suspended ‘limit down’, after falling 5%.
Transportation to and from China is severely limited. With big airlines such as British Airways, Lion Air and Seoul Air cancelling all flights to Beijing and Shanghai, it would be very unlikely to travel to China smoothly. Even traveling to popular holiday destinations could be a struggle.
According to the BBC, a hotel in Tenerife in Spain’s Canary Islands has been locked down after a visiting Italian doctor tested positive for coronavirus. Hundreds of guests at the H10 Costa Adeje Palace Hotel were initially told to stay in their rooms as medical tests were carried out.
Let’s hear what the industry professionals have to say
SOS Electronic: “At this time, we have not detected any specific interruptions within our supply chain. However, delivery dates for certain products may ultimately be affected in the future. Therefore, we cannot guarantee them with certainty, and we encourage customers to place new orders in time to avoid coronavirus problems that may affect their business.”
Mouser Electronics: “Regarding travels, we have restricted all travels to Asia and within Asia. We have recently also stopped all travels to Italy and are limiting all other travels to Europe, within Europe and to/from USA. It is highly likely that we will see very few people flying for at least the next month, unless exceptional circumstances, and we see the same from most of our supplier partners. As the situation changes, we will review.”