There has always been an argument all over the world that unfettered e-commerce is seen as “unfair competition” and should be regulated more. In the USA, Amazon is always cited as an example for their use of the cheap postal service to deliver goods
But the focus on unfair competition between e-commerce and brick-and-mortar stores is misplaced. Governments should rather take the opportunity provided by Covid-19 to support e-commerce in a risk-adjusted strategy to open up the economy, which has the potential for long-run benefits.
E-commerce in Zimbabwe has historically lagged that of peer regional and developed economies at about 0.7% of retail spend, compared with 1.5% in South Africa and Botswana and nearly 20% in the UK. Reasons include high data cost, low credit-card penetration and relatively high delivery charges, as well as the popularity of roaming the CBD and shopping malls as a leisure activity.
The southern African nation slipped six places to 115 out of 152 economies on their readiness to engage in online commerce, according to the 2019 United Nations Conference on Trade and Development (UNCTAD) Business-to-Consumer (B2C) E-commerce Index. Zimbabwe’s 2019 Index value stood at 33.1.
However, Covid-19 has changed this dynamic by halting leisure retail. It is likely to continue to be dampened significantly in coming months even as businesses slowly open. The lockdown has encouraged many people to try e-commerce for the first time, and it is likely that even once the lockdown is lifted delivery may be preferred to in-store experiences by those at risk, such as the immunocompromised and elderly, as well as those who want to continue with social distancing.
Before the coronavirus pandemic e-commerce in Zimbabwe was growing off a small base if not at all. The sector is varied, comprising various business models including a range of established retailers spanning most listed clothing, grocery and general merchandise and companies with both a physical and online presence, online-only retailers such as the fruit and veg start up Fresh in a Box.
Experts raises the need for the southern African nation to boost internet penetration in order to grow e-commerce. The development of e-commerce has many potential benefits for Zimbabwe. The country is at the stage where it is still possible to develop local e-commerce giants with local warehousing, employment and taxation, as opposed to having the market dominated by international players based offshore. There is also export and employment potential in e-commerce in the short run through delivery and warehousing hires, and in the long run through the creation of a regional hub for Africa. E-commerce can be fairly employment intensive as it requires pickers and packers and delivery services.
In addition, e-commerce allows for transparency and traceability, which is a benefit for taxation. There are also advantages to local manufacturers. The use of data analytics enables the prediction of trends based on search and purchase patterns, which can optimise manufacturing. This enables customers to compare products across a range of providers with ease and reduced transaction costs, and allows for a greater variety of products to be stocked. And, it creates scope for small and medium enterprises (SMEs) to expand into broader markets than would ordinarily be available, which is important in the Zimbabwe context, where there are relatively high barriers to entry to traditional retail.
There are issues of concern, including that e-commerce will displace brick-and-mortar companies, with negative effects on shopping malls and employment, though in most instances it has played a complementary role. There is also competition concern where large platforms tip to dominance and engage in anticompetitive behavior, necessitating regulatory scrutiny. But, for the most part there has been strong industrial policy support for e-commerce in various countries due to the potential economic benefits of using it as a tool to enhance export channels.
China has support measures for e-commerce both at a national and regional level. Guangdong province developed various interventions focused on local business adoption of e-commerce, including the creation of an online shopping marketplace for smaller local businesses, stimulating trial through the provision of vouchers to be redeemed through local e-commerce outlets, and subsidies such as assistance with rentals and research and development.
Malaysia has more than 40 initiatives and programs related to e-commerce, including economic incentives for warehouse conversion, e-commerce free trade zones, strategic investment, and promoting national brands through online channels. In the context of Covid-19, the key benefit of e-commerce is that it substantially reduces contact that would be experienced in physical stores. This has led to Senegal fast-tracking measures to support e-commerce by creating an e-commerce platform that provides access to the websites of SMEs that stock essential goods.
One of the potential concerns given the dominance of market platforms internationally is that allowing e-commerce would advantage larger and established platforms. One of the ways to mitigate this is to create mechanisms for SMEs to access e-commerce channels. This can be supported by the government through simple mechanisms such as providing small businesses with information packs on how to engage in online commerce, including lists of providers for various components of the value chain such as website hosting, warehousing, payment integration and delivery.
There could be a requirement for platforms to carry the products of certain third-party local providers. Stimulus to small businesses could include subsidization of online stores, potentially the development of a marketplace on which they could list, and creating funding solutions to support innovative platforms and the scaling up of SMEs’ capacity to sell online, as well as creating capacity for existing platforms to support SMEs.
Covid-19 is has set in motion a range of changes to business models, one of which is the move to e-commerce. The period of lockdown provides great potential to enhance the development of the e-commerce industry, taking into account the local context and internal e-commerce market and creating a platform for an outward-looking e-commerce hub. Consideration should therefore be given to ways in which e-commerce can be supported while aligning with public health and public interest goals.
In the long run, benefits of this approach could include a vibrant local e-commerce sector that builds employment and skills locally, future-proofing the sector from international dominance.