Global eCommerce is experiencing phenomenal growth rates, and the trend is likely to continue. It will positively affect international trade in many ways, as eCommerce provides a low-risk and low-cost way to conduct business.
eCommerce is transforming the way companies operate. From reducing transaction costs and growing trade opportunities to improving service delivery, small and large businesses can benefit from electronic solutions.
According to eMarketer, global eCommerce trade will rise to US$ 4 trillion in 2020. Jack Ma, the online retail guru and founder of Alibaba, believes 90% of all businesses will be online in the next 30 years. Research firm Frost & Sullivan predicts that cross-border B2B eCommerce will grow beyond US$ 6.7 trillion by 2020.
All of these predictions convey the same message: eCommerce will continue to grow, and it will grow at a fast pace. The impact is enormous, and international trade will benefit from it in many ways.
Local businesses can expand globally
With the help of eCommerce, anyone sitting anywhere can operate a global company. All you need is a computer and an internet connection. That’s why the biggest beneficiaries of eCommerce are small and medium-sized enterprises (SMEs).
In the traditional economy, physical infrastructure limits SMEs’ reach. In the digital economy, companies can expand their reach and sell their products across international markets.
That said, global eCommerce businesses still have to deal with many headaches that come with conducting cross-border transactions, such as tariffs, complying with customs documentation and researching legal requirements in different markets.
Lower costs and reduced barriers to market entry
The internet makes international trade possible, and it also makes it easier, faster and less expensive. Collecting information, finding the right suppliers, negotiating prices, arranging deliveries and marketing products are timely and costly, but the eCommerce ecosystem has simplified all these processes. Both, the buyer and the seller save time and money.
Targeted digital advertising is less expensive compared to traditional marketing channels and can be adjusted to fit smaller budgets. Businesses can also save on rent, as there is no need to have a physical store location. Staff costs can be lower, as an overseas virtual assistant might be cheaper than hiring in the domestic labour market.
Lower operating costs and lower upfront investment erase barriers to market entry. While it needs a significant amount of funds to set up a brick and mortar business, everyone can easily set up an online shop.
Thus, the benefits of eCommerce for international trade are enormous. It provides a low-risk and low-cost way to start a business, and there is potential to generate ROI in the long term.
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