The dynamics of e-commerce in global economy

Despite  the fact that the history of e-commerce  began in  the 1960s, it has undergone global changes mainly during the last two  decades. E-commerce  involves e-information exchange, e-capital flow, e-deal, e-marketing, e-banking and e-insurance services[1]. The development of e-commerce  is rather fast and intensive nowadays. The buyers’ wish to save time and money leads to businessmen’s need of using the achievements of Information Technology. E-commerce  is a  means of  carrying out business internationally and the pace  of its implementation and the results show the preconditions of a radical change  in sales and purchasing  system and a shift to  a global level in trade. The rapid  development of this type of  trading became possible only after the Internet became available to the wide masses of population[2].

Online trading has now become an  inseparable part of the global economy. But the development of this direction  has different paces  in various regions. The absolute leader in the field of e-commerce ,  is the Asia-Pacific region. In terms of e-commerce,  here it develops two times faster  than in Northern America (mainly due to China). This tendency is conditioned by numerous circumstances, especially by the demographic factor and the continuous growth  of the Internet availability[3]. The high growth rate of China’s economy in the last few years,  as well as expert forecasts  for its maintenance and  further development prove that it is to some extent linked  to the maintenance and growth  of China’s leading position in global e-commerce sector. 

When presenting  the dynamics of e-commerce , it is necessary to  take into account  the general global trend of digitalization of the society in order  to reduce the expenses  as much as possible regarding to the considerable part of transactions  if they can be implemented on electronic platforms. By  2023, online retail sales were  predicted to reach 6.5 trillion $, but since the outbreak of the pandemic the present predictions have been undergoing changes.

According to Eurostat’s data of the end of 2019, the centre of e-commerce  in Europe is Great Britain.The online sales here   are three times higher  than in Germany- Europe’s second largest market. The dominant site  in Great Britain  is Amazon, whom befalls the 54% of all sales. In Europe, 81.5% of e-commerce accounts for only  three countries: – Great Britain, Germany and France. Moreover, they show a persistent growth  of  this indicator  year after year[5].

At the moment, there are a number  of problems in the e-commerce  market that prevent the development and may  lead to unrealistic predictions made by the experts. In the online retail market you need to solve the following problems.

• Insure  high percentage of  accessible internet available to the public.
• Improve the conditions of providing buyer’s personal data security and the terms of returning  goods  and money.

Although in the conditions of modern market economy an attempt is made to reduce the level of state intervention in  economy as much as possible, it should be noted  that the regulation  of economy and its constituent part, the e-commerce, as well as   the  solution of the problems, existing in the area, are possible  only in  cooperation with the state . The state  should participate in the solution of the above-mentioned problems not directly but by adopting  laws and sub-legislative acts, and with  the  application of them it should ensure the systematic and full implementation of the measures taken by the market subjects to solve the mentioned problems. The customers, in their turn, need to be able to master the skills of using network toolkit and develop the culture of online purchase[6].

When  talking about the dynamics of e-commerce , it is important to  take into account the current  situation in the global economy, as  it is a new impetus  for the growth  of e-commerce . The problem is that the need of keeping social distance makes people stay at home and shop online, but there is also the following problem: the longer people stay at home and lose the opportunity of earning extra money, the more it leads to the preference changes towards separate segments of e-commerce . Therefore, the dynamic growth  in separate  branches  of e-commerce  simultaneously results in reductions of trading volumes  in the secondary branches . Self-isolation and the application  of various economic restrictions  would have been impossible at the beginning of the 2000s but today we have the most crucial thing, the opportunity to do shopping from home.

Nowadays, the digital world changes faster than the real world. Even an e-commerce giant  like Amazon intends to hire more employees to  meet the steady  increase of consumption demand in the USA . The consumers’ preferences also change depending on the pandemic. A survey conducted by   Nielsen revealed the main changes in  the consumers’ behaviour, such as  food and household items, necessary disinfectant and hygiene products  needed for protection against  the virus and so on[8]. 

Alibaba was the first in China to react to the outbreak of pandemic . using  its digital logistics platform. The virus situation in the country was the precondition which made the country move the technological experiments, conducted in the   field into the real life thus reducing  the human movements as much as possible. As a result, they had an opportunity to meet  the increasing demand without breaking restrictions enacted by the country.

In the second quarter of 2020,  Amazon expects  to invest around 4 billion $ for the expenses of COVID-19 to supply goods for its customers and to provide its employees’ security. In March and April, the company announced about the necessity of involving new employees. Since then, it has hired 175.000  new employees  in response to the continuous increase of customers’ demand[9]. The French and Italian online trading centres also prove the remarkable increase of e-commerce volumes  in pandemic conditions[10].

According to the  forecasts by GlobalData’s the Chinese e-commerce market will continue to grow  also  in future exceeding all the previous predictions[11].

Taking into consideration that the global  output  is slumping overally, it’s not surprising that for most countries the macroeconomic  indicators are slumping too As the e-commerce  is the main area of growth in these conditions, GlobalData predicts that in the coming years it will form the considerable part of GDP. According to the assessment of the same center , the pandemic will have a significant impact  on Italy, China and the USA as countries most affected  by  COVID-19).

To  sum up, we  want to remark that the main challenge for  the majority of e-commerce participants around the world  is the growing  demands for  technological component of online shops, the necessity of comprehensive  promotion  and the security of the customers’ personal and payment data. Taking into account the situation in the international economy caused by COVID-19, we can say the following: Due to the pandemic, the interest of the wide mass of public in  the online trade  has considerably increased . Thus, the main task of the people involved in e-commerce  has to be the diversification of customers. Using this information, the online trading centres can conduct   personalized and targeted campaigns to meet the preferences of each group. 

China’s experience  suggests that the efficient  usage of e-commerce  system is one of the most important ways of overcoming the pandemic by engaging citizens who have lost their jobs on digital logistic platforms, advanced technology and other areas. In this situation, the economist entities’ significant part of income is directed to the purchase of basic necessities  changing the structure of their consumption . However, it’s natural that after overcoming the pandemic the previous  structure of consumer demand will be generally restored . At the same time, the increase of the e-commerce volumes   becomes unavoidable. In pandemic conditions, the restrictions made the consumers implement the majority of their purchases and transactions on e-platforms allowing them  to discover and value the positive aspects of e-commerce that they had not previously  appreciated. The proof of what we said is  the constant  pursuit of comfort of people and online platforms provide  the opportunity to get the necessary goods quickly and conveniently, saving the most expensive resource-time. Therefore, those positive aspects of e-commerce  become the preconditions that will determine   its further growth  even after overcoming the pandemic. However, as  practice shows, the market, in cooperation with the state,  successfully finds solution to  all the problems that arise  in the process of  its development, and the most  effective solutions quickly become modern standards in the economy.

Author: Narine Petrosyan. © All rights reserved

Translator: Jemma Khachatryan.