Digital disruption – a major facilitator of global trade

Two decades back, no one would have believed if I said that I just now purchased a world-class Chinese product while sitting at home. It is however possible now, thanks to the internet. Advanced technology led digital disruption has given big impetus to global e-commerce. Over the last five years, global e-commerce sales have grown at a rapid pace of 20% every year and as a result the world has got shrunk now and accessibility to different products has become much easier for global customers. Digital disruption has therefore enabled the creation of a huge opportunity which is gradually getting unlocked.

In the retail space, e-commerce has elevated customer convenience to a new altitude. According to eMarketer around 53 percent of global internet users made at least one online purchase in 2016. Furthermore, retail e-commerce is expected to rise from US$1.3 trillion in 2014 to US$4 trillion in 2020. Jack Ma, founder of online retail giant Alibaba predicts that in the next 30 years 90% of all businesses will be online. This is a very big statement and clearly highlights how crucial online presence would be going forward.

In the B2B segment, as per the leading research firm Frost & Sullivan, globally, cross-border e-commerce can cross US$6.7 trillion by 2020. As more and more such manufacturing companies come online, this rate will get further accelerated.

All these statistics, unequivocally indicates one thing – digital disruption has changed the course of international trade across B2B and B2C segments. Trade barriers have been significantly lowered with the advent of e-commerce. Now, anyone sitting anywhere can operate a global company, simply by going digital. This new model has radically enhanced the ease at which businesses are done. Developing countries stand a tremendous chance of benefitting from this disruption. All you need is internet connectivity to start your own business.

The biggest beneficiary can be the Small and Medium Enterprises (SME) segment. SMEs constitute the largest segment of economy for most of the countries. Digital infrastructure allows such companies to expand their market outreach and prosper in their businesses. On an average, firms are able to reach 30 different economies using e-commerce platforms. SMEs can now very conveniently sell their products across international markets by going digital.

One country which stands out by realizing the most from the digital era is Estonia. The country has been one of the fastest adopters of sophisticated digital technologies and owing to its multiple awareness initiatives, online culture has become very deep rooted to the Estonian society. It offers a robust digital infrastructure which allows setting up of companies with minimal cost and zilch hassle. Over the years, Estonia has been able to build a strong digital ecosystem which is conducive to entrepreneurship.

One of the key contributions of Estonia in spreading the benefits of a strong digital infrastructure is the launch of e-Residency. Estonia is the world’s first country to introduce an e-Residency program that offers individual access to a government-issued digital ID, thus enabling the opening of a global European Union (EU) company fully online while working from anywhere in the world. With e-Residency anyone from anywhere in the world can enjoy the same fluid business advantages just like any other Estonian. It makes it considerably easier to run a company and extend the outreach well beyond the domestic economy. E-Residency allows market expansion to Europe. Digital entrepreneurs will be able to reap benefits of huge demands from 500 million population of the continent.

Another example of an innovative measure is United Nations Conference on Trade and Development’s (UNCTAD) ‘eTrade for all’. It focuses on developing economies with the objective of making e-commerce inclusive and facilitates trade. It is one of those groundbreaking initiatives which help in unlocking the growth potential by empowering people with access to online business. In one such example, Indian Institute of Technology, Delhi, supported by Department of Science and Technology, Government of India, has launched an e-Trade For All initiative – Women Entrepreneurship and Empowerment (WEE). As a part of this, participants will receive business mentoring both locally and also from e-Residency from Estonia which will help them drive entrepreneurship.

Picking up the thread from Jack Ma’s quote, it is very safe to forecast that global trade dynamics will undergo a through transformation over the next few decades all owing to digitization. Digital disruption would lead to greater collaboration and more seamless trade.

Authored by Salma Moosa, Founder & Managing Director, Startups Club Services