Kati Suominen, Founder and CEO, Nextrade Group, Technical Director, eTrade Alliance
While ecommerce enables small businesses to reach customers around the world, micro, small, and medium-sized enterprises’ (MSMEs) ability to engage in ecommerce is critically shaped by their location. Online sellers in large metropolitan areas with first-rate connections, logistics networks, talent, and financial and IT services have an edge over sellers in small rural and remote areas that often lack robust local ecommerce ecosystems and the logistics infrastructure to access local and global markets.
Of course, leading metropolitan areas, even ones with first-class internet connections and access to international trade corridors, also face challenges, such as enabling MSMEs to use ecommerce, dealing with new logistics challenges, and competing against peer cities in attracting investment in ecommerce-related sectors from global tech companies that can employ tens of thousands of people and create useful knowledge spillovers.
The purpose of this report is to pioneer in defining how developing country urban and rural MSMEs are using ecommerce, analyze the drivers of in-country disparities in firms' ecommerce use; and examine the rich set of activities that local governments around the world are pursuing to promote MSME ecommerce, deal with ecommerce logistics, and attract investment in ecommerce ecosystems.
The report aims to catalyze thinking among developing country cities and rural regions on local ecommerce development strategies and activities. The report also aims to support the eTrade Alliance’s “Mayors for eTrade” workstream to promote MSME ecommerce at local levels in developing countries. There are four main observations:
Numerous city governments have created programs to enable MSMEs to establish digital capabilities, engage in ecommerce, and finance their digital transformation. Cities such as Mexico City and Los Angeles are focused on enabling the digital transformation of brick-and-mortar firms into online sellers using digital marketing, while cities such as Madrid and Dublin have provided grant financing for such digital transformation projects. Several Indian states and cities have worked with leading ecommerce retailers such as Amazon and Walmart to integrate MSMEs into these global companies’ value chains. There are also specialized city-level programs to enable online seller MSMEs to access useful capabilities such as cybersecurity or logistics services.
Several national governments and rural regions, often in partnership with regional and global technology companies, have created programs to enable rural firms and residents to use ecommerce to sell and purchase goods. Ecommerce can be a powerful means for rural firms to reach new markets and suppliers, and for rural consumers to access the same varieties of goods and educational, health, and e-government service as available to their urban peers. In Bangladesh, Thailand, and the United States, among others, national governments have worked to enable rural ecommerce by building marketplaces and online services for rural MSMEs, and helped MSMEs acquire digital skills. In a number of other countries, such as Nepal, Nigeria, and India, local and state governments have worked with regional and global ecommerce companies to enable rural companies and residents to use ecommerce and access an address for the first time. Still other subnational governments, such as Northern Ireland, have provided financing for rural firms to create ecommerce capabilities. China has pursued a concerted effort with leading ecommerce companies and local governments to promote ecommerce-driven Taobao Villages across semirural and rural regions.
City governments and stakeholders have deployed a wide range of initiatives to facilitate ecommerce logistics and create new logistics-related jobs. Major cities, already burdened by sprawl, traffic, and pollution, have struggled with the burgeoning volumes of ecommerce delivery. At the same time, ecommerce logistics are opening new opportunities for cities to create new jobs in logistics and warehousing, and many cities have created concerted initiatives to manage and benefit from ecommerce logistics. Some examples include Los Angeles’s public–private Urban Air Mobility Partnership, which seeks to introduce low-noise electric delivery aircraft; the Seattle Neighborhood Delivery Hub, a testbed for innovative sustainable urban logistics strategies; the initiatives of Paris and New York City to incentivize night-time delivery; and work in São Paulo and Bangalore to evaluate the impact of transportation policies and interventions on ecommerce logistics.
Many advanced country and emerging market cities have set out to build talent pipelines for the technology sector as well as modern amenities for technology workers, and issued fiscal incentives and low-carbon initiatives to attract technology companies. Investment from major technology companies enables cities to create new technology jobs, cultivate technological talent, and bolster their value proposition as global tech hubs. Major global technology companies have established a presence in recent years in cities such as Buenos Aires, Bogota, Bangalore, Bangkok, Manila, Mexico City, and San José. These cities are succeeding largely because of their commitment to supplying companies with a pipeline of world-class technological talent, including through university partnerships and tech campuses that focus on grooming and aggregating talent across technology sectors. Many have also deployed fiscal incentives. Commitment to sustainability and such strategies as the provision of solar energy will likely going forward be important for cities to cater to technology companies that have net-zero emissions targets.
These experiences provide a rich set of ideas for local governments and development partners in their work to leverage ecommerce to create jobs, grow small businesses, and build more sustainable cities.
The author's views do not necessarily reflect the views of the United States Agency for International Development or the United States Government or any of the eTrade Alliance members.