News from 2019

How China’s e-commerce playbook can help emerging economies transform – The View by Ben Crawford

Source: South China Morning Post, March 13, 2019. https://www.scmp.com/comment/insight-opinion/hong-kong/article/3001455/how-chinas-e-commerce-playbook-can-help-emerging

Emerging markets, like China’s, have the advantage of a sizeable young population that is highly adaptable, if not already at home in the mobile digital era. Better yet, by learning from US tech leaders, emerging markets will have the best of both worlds.

After decades of being regarded as “the world’s factory”, it’s no exaggeration to say that China has reinvented itself to become a global tech leader. It is already home to over half the world’s AI unicorns and has produced internet titans like Baidu, Alibaba and Tencent – also known as the BAT – the last of which surpassed Facebook in value in 2017.

As the nation slips into its new role of being a leading innovator, especially in areas like e-commerce and mobile, it has left behind some important lessons and reflections for other emerging economies.

To begin to understand China’s meteoric rise is to also realise the crucial role that the internet has played in all of this. This is hardly surprising when considering the internet’s potential to bring radical change across all industries and economic sectors. It impacts people’s lives in every way and paves the way for exciting developments in industries like robotics, artificial intelligence and health care.

Similarly, internet commercialisation has also been a linchpin of economic growth, with more than 40 per cent of the world’s e-commerce transactions taking place in China in 2017, up from only 1 per cent a decade ago. By 2022, China’s e-commerce market is forecast to reach a staggering US$1.8 trillion. The effect this will have cannot be understated.

At the most fundamental level, e-commerce hits right at the core of an economy, creating myriad opportunities for small and medium-sized businesses and changing the face of retailing, logistics and supply chains. Evidently, all of this catalyses the growth of the economy significantly.

Alibaba, owner of the South China Morning Post, is perhaps the best-known example to demonstrate this. It has revolutionised the way small businesses in China sell and has positioned itself as one of the most sophisticated and lucrative retail online platforms in the world. E-commerce platforms like JD.com have also had a transformative impact. And the platforms WeChat and Alipay have a virtual duopoly in the online payments sector in China, making transacting online easy for businesses and consumers alike.

But what makes China’s new-found superiority in e-commerce a model that other emerging nations can follow and draw inspiration from?

To begin with, the fact that China’s business infrastructure was initially not as developed as the West’s actually proved to be an asset. Because of this, technology and e-commerce firms have been able to leapfrog certain developments, to the dismay of their Western counterparts, creating an infrastructure that is more ready to embrace the future. Other emerging nations around the world share this “direct to mobile digital” consumer characteristic, skipping over the desktop and laptop generations of internet connectivity.

Secondly, the new wave of digital – where everything is in the cloud and mobile – further plays to the strengths of emerging market players and their young populations. Around 90 per cent of the world’s population who are under 30 live in an economy that is developing or “transitioning”. This represents a very high percentage of the economy that can adapt to technology a lot faster on average when compared to the West.

Thirdly, China is actively exporting its internet successes, particularly in Southeast Asia – empowering businesses there to transact online through the same tools developed in China. As a component of China’s Belt and Road Initiative, investing in infrastructure across 65 mostly emerging and transitioning nations around the world, the “Information Silk Road” combines internet corridors in many of those countries into a secure internet infrastructure.

Similarly, China’s tech giants are enabling companies globally to get online. For instance, Alibaba allows businesses all over the world to both acquire and sell stock – equipped with nothing more than a mobile phone – through its Taobao and Tmall platforms.

In addition to the lessons that other emerging economies may glean from the Chinese experience, there are also ways in which they may strive to do better than China. For example, when it comes to the protection of personal privacy and corporate intellectual property, one could argue that China is not world-leading.

Also, where Facebook and Google have not to date been active in China, and Amazon has not achieved much market share there, most emerging nations enjoy the benefits of being able to use the tools provided by the American tech giants as well as their Chinese rivals to do business online.

There are also some questions which remain unanswered, like whether the market power of the internet giants of China and America is so complete that it will entail every new potential competitor from emerging nations being either crushed or swallowed up by the existing players.

But one thing is certain for any economy that aims to leverage the full power of internet commercialisation. If the internet has the ability to transform emerging economies and help them leapfrog to positions of global economic dominance, it must integrate holistically across all sectors in society to avoid marginalising the most vulnerable parts.

It’s an exciting time for emerging economies. The ripples resulting from the growth of e-commerce can be felt everywhere – from Latin America to Africa and the Asia-Pacific region – enabling companies to reach consumers that were previously inaccessible.

The opportunity is there for the taking. But whether emerging economies can successfully make the most of it will depend on how ready they are to jump into the future without first stripping away their past. As they walk the tightrope, those that manage to stay on course will be the ones best able to leverage the opportunities of the internet while also mitigating the risks involved.

About Ben Crawford:

Ben Crawford is an experienced CEO with a demonstrated history of leading public companies in the internet industry. He is currently the CEO of CentralNic, a global domain registry provider focused on emerging economies that is listed on the London Stock Exchange