E-commerce – Is the Pacific ready?
E-commerce has quickly immersed itself into many aspects of our lives. From the Deliveroo rider bringing your food to the new pair of boots your colleague orders online or the Uber ride home after a few drinks while watching the latest episode of House of Cards (which I was not at all impressed with!) on your mobile Netflix. Increasingly, traditional commerce and trade has been replaced by its e-commerce counterpart.
So, what is e-commerce? E-commerce is generally defined as any buying and selling of products and services through an electronic medium (primarily the internet) regardless of whether some or all aspects of such transactions are being executed online or through a digital platform. We are increasingly experiencing a shift away from traditional face-to-face contact toward more digital forms of trade. E-commerce can be broadly broken up into the following models:
B2B (business to business) refers to e-commerce activities between businesses. For example, your company purchasing a data back-up and recovery service from a service provider.
B2C (business to consumer) is what we as individuals experience mostly in our daily lives. It replaces the more traditional and visible form of retail where businesses offer goods and services to consumers directly, but this is done online. For example, subscribing to music from iTunes.
C2B (consumer to business) refers to a model where businesses are able to extract value from consumers and vice versa. For example, a customer adding value to the company by providing positive testimonials or blogging about a new product for complimentary goods.
C2C (consumer to consumer) – markets or platforms through which consumers can transact among themselves. Common examples for these are Ebay, Facebook’s Marketplace and the numerous other similar platforms which enable one consumer to transact with another.
E-commerce - changing the way we do business
The pervasiveness of e-commerce is rapidly growing, accounting for more than one-tenth of global retail sales in 2017, with predictions that it will reach 17.5% of all retail sales by 2021. While the Australian market has lagged compared to the US and Europe, it has had decent growth over the last couple of years with e-commerce sales forecasted to make up for 7.2% of total retail in the country.
And while the Asia-Pacific region has the largest online market in the world with rapid growth of e-commerce coming out of Australia and Asia, e-commerce in developing Pacific nations is still a fledgling part of commerce and trade.
By its very nature, e-commerce reduces the geographical barrier that poses one of the fundamental challenges faced by businesses in the Pacific. Through e-commerce, domestic products become available to larger international markets and on the flip side, products from around the world are only ever an online search and electronic payment away regardless of where you are located. It also enables e-stores to operate at a relatively lower cost than brick and mortar stores – no rent for store locations, no floor staff or security etc. The concerns around limited shelf space does not exist in e-commerce and businesses are able to exhibit whatever products they want to online.
Last month Pacific Trade and Commerce held digital marketing workshops in Fiji, targeting tourism businesses such as accommodation providers and tour operators while also looking at how local businesses could make their products available on platforms such as Amazon. Programs such as these are timely for local businesses that are keen to exhibit the uniqueness of their Pacific products on a global platform.
Impediments for the Pacific
As e-commerce is penetrating Pacific markets, there are a number of hurdles that need to be addressed before Pacific nations experience any real growth in this area.
Internet connectivity along with its cost, speed and quality is pivotal to the success of any e-commerce activity. In a recent report titled Digital in 2017 – ANZ and the Pacific, media company We Are Social and global social media management company Hootsuite shed some light on the level of internet penetration and mobile use in the Pacific. Statistics indicate that in 2017, Fiji has a high rate of internet penetration and active social media usage at 48%, while mobile subscriptions stood at 133%. With this high internet usage, Fiji has seen an impressive increase in B2C and C2C business as people get more comfortable with making purchases online via computers and smartphones. Vanuatu is also seeing a rise in such activities, with internet usage now at 30% and mobile subscribers at 85%.
High costs associated with internet connectivity remain prohibitive to the growth of e-commerce in markets such as Solomon Islands and PNG. However, upon completion of the Coral Sea submarine cable, mobile telecommunication and internet penetration in these economies are expected to surge.
High levels of internet penetration alongside social media use and mobile subscriber numbers remain clear indicators of the presence of e-commerce.
Fig. 1 Internet Usage across Pacific Island Nations
Along with internet capabilities, e-commerce also requires accessible, affordable and secure information technology that allows online payments. As e-commerce still remains a fairly new mode of doing business, security concerns persist about not just making payments online but making purchases without first physically seeing the items purchased. Relatively low levels of computer literacy means that the Pacific could also become a target for online scammers.
Consumer protection will be of utmost importance as online commercial activities grow in the Pacific. Policymakers will also need to ensure that there is a strong legal and regulatory framework for transactions executed online, as well as consideration on the tax implications surrounding cross-border e-commerce trade.
While the Pacific is well-placed to capitalise on the opportunities to be had as it jumps on the e-commerce bandwagon, there remains some work to be done to enable development in this area. Infrastructural challenge is fundamental to the progress of e-commerce but equally important is the legal and regulatory environment as well as training and education to inspire confidence and adoption of this new method of doing business.
For now, we wait for the next disruption that internet or technology will throw at us. A commercial drone hovering over you as you laze under a palm tree, trying to decipher your favourite cocktail perhaps?
The Pacific Legal Network has a wealth of experience in privacy laws, data protection, intellectual property and execution of IT related contracts. If you are considering incorporating e-commerce into your business, please contact our legal team!