By Nguyen Ha Linh, Tech For Good Institute
E-commerce in SEA has observed exponential growth during the pandemic as commercial transactions are primarily conducted online. According to the Tech for Good Institute’s Platform Economy Report, most consumers surveyed in 6 major SEA markets use different e-commerce platforms for purchases.
Use of e-Commerce Platforms in SEA-6
Though e-commerce has thrived compared with offline retail activities, thanks to its flexibility and inclusiveness amid restricted mobility, digital merchants still have difficulty reaping the full potential of their businesses. Constraints in time, financial resources, digital literacy, and business skills are some of the most common and significant challenges.
The World Bank released its “Unlocking the Full Potential of Digital Merchants” policy brief which highlights key challenges e-commerce merchants face based on its second round of the COVID-19 Digital Merchants Survey. In Indonesia, 86% of representative businesses observed a decrease in Y-o-Y sales during the first year of the pandemic, but only 16% of Shopee’s merchants went through the same experience, according to the policy brief.
To tackle the challenges above and promote equitable growth in e-commerce, there are key insights and policy recommendations from the policy brief that need the attention of governments, the private sector, investors, and consumers.
Equal access to affordable and high-quality childcare addresses time constraints for e-commerce merchants, especially female ones.
E-commerce merchants face time constraints as they have to juggle multiple responsibilities, which, consequently, reduces their sales. Based on the report, non-e-commerce work (39%) and childcare (24%) are the top two reasons limiting merchants’ time allocation to e-commerce work. Moreover, childcare affects female merchants disproportionately with 35% reporting it as a time-constraining factor compared to only 10% of their male counterparts. This is also consistent with findings from the Philippines, where female online freelancers who are the primary caregivers at home, cited the need to take care of young children as a key reason why they turned to digital platform work. While e-commerce work offers better flexibility than traditional work, the lack of childcare support leads to many female merchants rejecting promising opportunities.
To tackle time constraints, it is important to provide more support in areas of childcare, such as the provision of equal access to affordable and high-quality childcare services. Childcare grants can also be provided to these self-employed low-income merchants so that they are able to lean on childcare support services to alleviate time constraints needed to be spent on growing their businesses. It is also equally important to implement educational campaigns on gender roles and gender equality to mitigate the unequal gender-based division of household chores including childcare.
Policies increasing financial and digital literacy allow e-commerce merchants to access necessary financial support.
Lack of financial and digital literacy poses a major challenge to those who seek additional funding for their e-commerce businesses. According to the Tech for Good Institute’s Platform Economy Report, 60% of SEA MSMEs require financing but cannot obtain loans from bankers/lenders. Digital loans are popular among merchants to gain more capital with 40% of them reported to have applied for one in the past, based on the World Bank policy brief. Despite such popularity, 17% and 16% cited a lack of financial understanding and awareness respectively as barriers for them to take digital loans.
To tackle limited funding and help merchants access financial support, it is crucial to implement policies and initiatives that improve financial and digital literacy. E-commerce companies and local officials can organize workshops and classes on the benefits, costs, and terms of digital loans so that merchants can make informed decisions. For example, digital platform companies like Grab and Lazada have also provided digital loans to assist merchants in growing their businesses. Educational campaigns on how these loans can be applied to businesses should also be implemented so that merchants are educated on the proper use of these digital loans.
Targeted programs to improve business knowledge and digital skills increases merchants’ ability to adapt to the changing e-commerce landscape.
Lack of business knowledge and digital skills impede merchants’ ability to compete in a dynamic e-commerce landscape. Indeed, according to the policy brief, around 38% of surveyed merchants request additional help with sales and marketing. Operating an e-commerce business requires a diverse set of digital skills (monitoring web pages, running advertisements) and business knowledge (setting strategic prices, managing customer relations). As many e-commerce merchants are first-time entrepreneurs, they may not be well-equipped with the necessary skills to maximize their profits and impacts.
To tackle limited business knowledge and digital skills, governments and digital companies should devise programs that provide merchants with low-cost training. For example, amidst the pandemic, Grab launched its Small Business Booster Programme which aims to help businesses adapt their operations to an increasingly digital-reliant world. Such training programs can be published as free online courses or offline workshops that enable merchants to hone their abilities to manage digital platforms and online businesses. To teach merchants how to better engage with their customers, e-commerce player Shopee also has its own Seller Education Hub.
Thus, while e-commerce has proven to be a lifeline for many businesses during the pandemic, there are still significant challenges that digital merchants face. The World Bank’s policy brief on “Unlocking the Full Potential of Digital Merchants” sheds light on some of these challenges, including time constraints, lack of financial and digital literacy, and limited business knowledge and digital skills. To address these challenges and promote equitable growth in e-commerce, there is a need for concerted efforts from governments, the private sector, investors, and consumers. Providing equal access to affordable and high-quality childcare, increasing financial and digital literacy, and targeted programs to improve business knowledge and digital skills are crucial steps toward unlocking the full potential of digital merchants.