How COVID-19 triggered the Digital and e-commerce turning point

Amid slowing economic activity, COVID-19 has led to a surge in e-commerce and accelerated digital transformation.

As lockdowns became the new normal, businesses and consumers increasingly “went digital”, providing and purchasing more goods and services online, raising e-commerce’s share of global retail trade from 14% in 2019 to about 17% in 2020. 

These and other findings are showcased in a new report, COVID-19 and E-Commerce: A Global Review, by UNCTAD and eTrade for all partners, reflecting on the powerful global and regional industry transformations recorded throughout 2020.

At an event to release the report, UN General Assembly President Volkan Bozkir said the trend towards e-commerce is likely to continue throughout the recovery from COVID-19.

“We need to recognize the challenges and take steps to support governments and citizens as they continue to embrace new ways of working,” he said.

UNCTAD Acting Secretary-General Isabelle Durant said: “Businesses and consumers that were able to ‘go digital’ have helped mitigate the economic downturn caused by the pandemic.”

“But they have also sped up a digital transition that will have lasting impacts on our societies and daily lives – for which not everyone is prepared,” she said, adding: “Developing countries should not only be consumers but also active players and thus producers of the digital economy.”

Some benefit, others fall behind

The findings show the strong uptake of e-commerce across regions, with consumers in emerging economies making the greatest shift to online shopping.

Latin America’s online marketplace Mercado Libre, for example, sold twice as many items per day in the second quarter of 2020 compared with the same period the previous year. And African e-commerce platform Jumia reported a 50% jump in transactions during the first six months of 2020.

China’s online share of retail sales rose from 19.4% to 24.6% between August 2019 and August 2020. In Kazakhstan, the online share of retail sales increased from 5% in 2019 to 9.4% in 2020. 

Thailand saw downloads of shopping apps jump 60% in just one week during March 2020.

The trend towards e-commerce uptake seen in 2020 is likely to be sustained during recovery, the report says.

But in many of the world’s least developed countries, consumers and businesses haven’t capitalized on pandemic-induced e-commerce opportunities due to persistent barriers.

These include costly broadband services, overreliance on cash, lack of consumers’ trust, poor digital skills among the population and governments’ limited attention to e-commerce.

“Countries that harness the potential of e-commerce will be better placed to benefit from global markets for their goods and services in this digitalizing economy, while those that fail to do so risk falling behind even further,” said Shamika N. Sirimanne, UNCTAD’s technology and logistics director.

One of the challenges, the report says, is that the pandemic has mostly benefited the world’s leading digital platforms.

Many solutions being used for e-commerce, teleworking and cloud computing are provided by a relatively small number of large companies, based mainly in China and the United States.

Smaller players may have gained a deeper foothold, but their market presence is still dwarfed by the digital giants, which could entrench their predominant role during the pandemic.

“The risk is that the huge digital divides that already existed between and within countries will only worsen in the wake of the pandemic,” said Torbjörn Fredriksson, UNCTAD’s digital economy head.

“The result will be even deeper inequalities that would threaten to derail progress on the UN Sustainable Development Goals,” he added.

Government responses

Most governments prioritized short-term responses to the pandemic, but some have also begun to address longer-term strategic requirements for recovery. Several governments in developing countries have intervened to protect businesses and individual incomes. 

In Latin America and the Caribbean, for example, Costa Rica’s government initiated a platform for businesses without an online presence, and a smartphone app and texting service to facilitate trade among producers of agricultural, meat and fish products. 

In Africa, Senegal ran an information, education and awareness campaign on the benefits of e-commerce across all segments of the population.

In Asia, Indonesia launched a capacity-building programme to expedite digitization and digitalization among micro, small, and medium enterprises.

Action points for inclusive e-commerce

The report maps out actions that should be taken by three stakeholder groups to ensure more inclusive benefits from e-commerce.

It says governments need to prioritize national digital readiness so that more local businesses can become producers in the digital economy, not just consumers.

According to the report, building an enabling e-commerce ecosystem requires changes in public policy and business practices to improve the digital and trading infrastructure, facilitate digital payments and establish appropriate legal and regulatory frameworks for online transactions and security.

“The approach must be holistic. Policies should not be made in silos,” said Ms. Sirimanne.

Then, to capture value from digital trade, digital entrepreneurship must become a central focus.

This requires faster digitalization for smaller businesses and more attention to digital entrepreneurship, including reskilling, especially of women.

Countries also need better capabilities to capture and harness data, and stronger regulatory frameworks for creating and capturing value in the digital economy, the report says.

Lastly, the international community needs to find new, bold and smart ways to work with governments and the private sector to leverage these opportunities.

“The digital divide, which was real long before COVID-19, is a challenge which can be removed through our collective efforts and international support,” Mr. Bozkir added. “E-commerce offers immense potential across the SDGs. Efforts, therefore, must be made to harness this rapidly emerging tool.”

To support UN-wide work on the topic, Mr. Bozkir announced a one-day high-level thematic debate on digital cooperation and connectivity on 27 April 2021.

This will provide a platform for high-level political statements of intent and support, and frank exchanges among UN entities, technology leaders, constituents and stakeholders, to build momentum and mobilize the international community to strengthen existing multi-stakeholder initiatives and partnerships, and support the creation of additional partnerships to accelerate implementation..

Charting the future of e-commerce

Better dialogue and collaboration are needed to identify new pathways for the digital economy.

The UNCTAD-led eTrade for all initiative, currently funded by the Netherlands, Germany and Estonia, is one such platform for doing so.

Over the past four years, the initiative has served as a global helpdesk for developing countries to bridge the knowledge gap on e-commerce information and resources, and catalyse partnership among its partners.

Since the outbreak of the pandemic, more than 30 eTrade for all partners have worked together to raise awareness on the e-commerce opportunities and risks emerging during the crisis.

They have also identified ways in which businesses in developing and least developed countries could overcome the challenges.

The COVID-19 repository launched in the fall of 2020 and the new COVID-19 and e-commerce report are the initiative’s latest collective efforts to build a sustainable digital future.