The Effect of E-Commerce on Economic Development
E-commerce or electronic commerce was introduced in the 1990s and have been evolving over the years (Santos, Sabino, Morais, & Gonçalves, 2017). The idea behind e-commerce is to enable business owners to list and sell their products or services by digital means. E-commerce is a linked process that includes listing and selling the products/services in an online presence (usually an online store), delivering the products/services to the customer, and communicating with the customer using an online communication channel without the need of performing face-to-face interaction between the buyer and the seller, or being in the same place at the same time. That alone is considered convenient for any consumer.
The problem at hand is that shopping is time consuming that many people found to be an issue. Some stores introduced ordering by the phone, where consumers call the business and ask for the product or service and have it delivered to them. With e-commerce, the game has changed where consumers use the internet to go to the shop’s online store and within few minutes gets his order directly using credit card or cash on delivery (COD). One example of the challenges in the e-commerce market is gaining customers’ trust. Some customers do not trust online ordering and feel that they could get themselves into a risk of fraud or that the sold items are not as described. Trust is an important aspect in e-commerce, the main difference in electronic trade and traditional trade is that in traditional trade, the customer chooses to go to the physical store and can make a decision on wither to buy the product or not after experiencing the physical presence of the item that he is about to buy. In the online experience, the customer can see the image or video of the product but cannot really experience the physical presence and interact with the item, which might make the customer hesitant on buying the item. It is the role of the business owner to make sure that he is presenting his business in the best possible way, moreover; great customer experience is one of the main elements of any great e-commerce operation. The customer will return to the business and might become a loyal customer if he was satisfied, and saw the value of the operation starting from browsing the products/services until the items reaches his doorsteps.
Comparing online shopping with traditional shopping and the effects on economic growth can differ depending on how one is looking at it. When looking at the growth as number of sales, it can be argued that online shopping has jumped pass traditional shopping during the pandemic and the revenues from online shopping has increased while the traditional shopping growth decreased due to social distancing. Another important factor is that some countries forced a lockdown on major areas including shopping malls, grocery stores and hyper markets.
Challenges and advantages of e-commerce
There are many advantages for e-commerce, being able to sell products while the business owner is asleep is one of these advantages. When you have a traditional store, customers are going in and out of the store during the working hours. In an e-commerce store, customers can buy products/services anytime of the day, and the business owner do not have to be available at the time of purchase and can process the order when he gets the chance. The process should be connected with a notification system to inform the store manager about new orders, also the system should also take into consideration stock management and delivery capacities. One of the most important features in an e-commerce system is to enable the business owner to keep track of his/her orders and products at a click of a button. The traditional way of making sales through a physical marketplace or store should be interconnected with the e-commerce business. Having two separate systems for stock management and financials is not convenient to deal with. Having an online store is crucial for any business looking for more exposure and new channel of sales. Being in the e-commerce space have become a norm for any business these days; especially during the current pandemic (COVID-19). During the pandemic many businesses suffered, and others went bankrupt. Customers are using online services even more than before because of the social distancing that is advised by the health and safety regulators. According to an article from the Bank for International Settlements (BIS), it is expected that 38% of consumers will shop online more frequently after the pandemic (Alfonso, Boar, Frost, Gambacorta, & Liu, 2021). This can be an indicator that consumer behavior is changing rapidly during the pandemic.
There are three main elements in any e-commerce workflow, the first one is communication, where the consumer can use this channel to better understand the product that he is after. Advantages in communication including offering better information on products and service, prices, service availability, technical support, and after-sales services. The second element is transaction, it has the following advantages including virtual online store, lower costs, human error reduction, customization on promotions, and flexible pricing. The last element is distribution, it has the advantage of lower waiting time for consumers, lower delivery costs, follow-up on orders, and reduce the number of representatives by replacing them with online chat bots (Santos, Sabino, Morais, & Gonçalves, 2017).
Emerging markets during COVID-19
It was shown that Fast-moving consumer goods markets (FMCG) are the first and most dominant markets to adopt e-commerce during the pandemic. It was challenging to shift the operations from the traditional workflow to the electronic workflow. The demand for consumer-packaged goods (CPG) increased significantly for the people were afraid that markets would get out of stock due to the heavy demand. Consumers were buying in large amounts and storing the grocery in their households. During the pandemic many industries suffered and consumer buying behavior changed dramatically. According to the United Nations Conference on Trade and Development (UNCTAD), “COVID-19 has changed online shopping forever”, a survey shows that the total online orders raise.
but the total spending falls (COVID-19 has changed, 2020).
The survey showed that consumers in emerging economies are the ones who made the greatest shift from traditional to online shopping. Although the pandemic was and still a global issue and people are trying to cope with the current situation, it was a blast for online and digital businesses. Companies like Microsoft, Zoom, and Facebook are known as the digital giants during the pandemic, with a huge demand on online conference meetings instead of the traditional face-to-face meetings, Zoom and Microsoft teams served companies, schools, and universities all over the world. The demand on technology has increased and companies that provide online services are getting into new customer segments that forced them to change their business model and operations to get advantage of the situation and not miss the chance of opportunity that was presented because of the pandemic.
Customer buying behavior
The customer is the main stockholder in any business, any business is trying to make profit either by creating products to eventually sell to a customer, or by providing a service to that customer. If the customer is not convinced, he will not buy the product / service. Customer behavior is the focus of any successful business. Some companies try to solve a problem that customers are facing by developing a product to solve the problem and sell it to that customer, hence providing value to the customer that would eventually make him convinced to buy that product. Another way to look at it is to create a problem that was never there in the first place, or was not viewed as one, and provide a fix for it. Companies like Apple are great at doing this, they created value by introducing the iPhone and showed people that they can have a touch screen on their phone. People were in a place and time that regular mobile phones were used with keyboards on the phone where they can type the massages they like or interact with the mobile phone in that particular fusion. Coming up with a touch screen was revolutionary at that time and being a company like Apple they did well to show customers that this is the future of mobile phones. Today everyone has a touch screen smart phone, this is the customer revolution over the years, customers adopt what brings them value and follow what makes their life easier and more continent.
What is being presented as a product or service, customers can always compare and look around for alternatives. Being the company that provide value is one of the things that customers are looking for, customers are also looking for after sales services. According to an article, with customer preference changing rapidly, companies need to always keep track of their customers feedback and means of collecting data to stay ahead of the latest trends and behaviors (Fabius, Kohli, Veranen, & Timelin, 2020).
Economic development and COVID-19
According to a recent article from the Organization of the Petroleum Exporting Countries (OPEC), Kuwait economy depends on oil revenues as it contributed to around 45% of Kuwait’s GDP in 2019. Ever since the pandemic started oil prices dropped to around 70% of its value, as of April 2020, crude oil prices were reported at around USD 19.7 / barrel. This dramatic change would shift any country’s economy and probably to the worst. The article also suggests that the fall and rise in oil prices might have a negative impact on the exporting countries as of today the vaccination for COVID-19 is rolling out, but the pandemic is still active, and the countries need to have risk management in case the pandemic stay longer. The article encourage development in other projects and specially infrastructure projects, in addition to improving the requirements of power generation is greatly expected to offer support for the oil industry during the times of pandemic (Monthly Oil Market Report, 2021). Economic development depends on oil exports mainly in Kuwait, focusing on private sector and small and medium-sized enterprises (SME) can fill the gap and participate in the GDP positively. A lot of businesses are operating in Kuwait and the fact that these businesses need to shift to electronic shopping is overwhelming in a time like this. E-commerce can have an impact in Kuwait’s economy overall and enable businesses and organizations to sell locally and worldwide. The intra-trade and overseas trade are useful for the economy in general and especially Kuwait’s economy. Supporting the SMEs and enabling them through laws and regulations to have the power of importing and exporting from and to Kuwait will refresh the trade and encourage others to build businesses, thus supporting the economy.
Santos, V. F., Sabino, L. R., Morais, G. M., & Gonçalves, C. A. (2017). E-Commerce: A Short History Follow-up on Possible Trends. International Journal of Business Administration, 8(7), 130.
Alfonso, V., Boar, C., Frost, J., Gambacorta, L., & Liu, J. (2021). E-commerce in the pandemic and beyond. BIS Bulletin(36).
COVID-19 has changed online shopping forever, survey shows. (2020, October 8). Retrieved from United Nations Conference on Trade and Development: https://unctad.org/press-material/covid-19-has-changed-online-shopping-forever-survey-shows
Fabius, V., Kohli, S., Veranen, S. M., & Timelin, B. (2020, August 17). Meet the next-normal consumer. Retrieved from McKinsey & Company: https://www.mckinsey.com/business-functions/marketing-and-sales/our-insights/meet-the-next-normal-consumer
Monthly Oil Market Report. (2021, February 11). Retrieved from Organization of the Petroleum Exporting Countries: https://www.opec.org/opec_web/en/publications/338.htm
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