Retail e-commerce sales worldwide are projected to double in less than three years from now to $4 trillion, according to researchers from Fletcher School at Tufts University and Global Enterprise Risk and Security, in an article published in collaboration with the Harvard Business Review (HBR) and the World Economic Forum.
They noted that digital players wield outsize market power, that based on their stock prices on July 6, 2017, Apple, Alphabet, Microsoft, Amazon, and Facebook were the five most valuable companies in the world.
“The most valuable non-American company, 7th overall, was China’s e-commerce giant, Alibaba Group. With products that rely on network effects, these players enjoy economies of scale and dominant market share. They have deep resources for innovation with the ability to accelerate the penetration and adoption of digital products,” they pointed out.
They emphasized that digital technologies are poised to change the future of work, that automation, big data, and artificial intelligence enabled by the application of digital technologies could affect 50 percent of the world economy.
“There is both anticipation and apprehension about what lies on the other side of the threshold of the ‘second machine age.’ More than 1 billion jobs and $14.6 trillion in wages are automatable by today’s technology, which could open the door to new ways to harness human energy as well as to displacing routine jobs and increasing social inequities,” they stated.
Their projection is however, fraught with a major hurdle, which is the continuing stickiness of cash, which has not been displaced by digital alternatives despite myriad options.
They highlighted that in 2013 about 85 percent of the world’s transactions were in cash, adding that while the Netherlands, France, Sweden, and Switzerland are among the least cash-reliant countries in the world, even in the Eurozone, 75 percent of point-of-sale payments are in cash.
“Most of the developing world is overwhelmingly cash-dependent; in Malaysia, Peru, and Egypt, only 1 percent of transactions are cashless. Even India’s demonetization experiment has not broken the country’s heavy cash dependence,” they averred, stating further that five months after India demonetized 86 percent of its currency, cash withdrawals were actually 0.6 percent higher than a year earlier.
However, they said that world’s digital economy stands at a threshold where opportunity and risk stand in balance but stressed that digital markets are uneven as politics, regulations, and levels of economic development play a major role in shaping the digital industry and its market attractiveness.
“With the world’s largest Internet user population – 721 million – China has a parallel digital market because so many of the major global players have no presence there,” they said, adding that India, with its 462 million Internet users, has a digital economy representing arguably the greatest market potential for global players. They, however, see downsides as the market operates in multiple languages and multiple infrastructure challenges, despite the government having taken sweeping actions that affect the digital market.
The European Union is reported to have 412 million Internet users, but its market is fragmented and still in the process of creating a ‘digital single market’, that in many countries, several websites or digital companies are blocked.
“Around the world, digital access itself is far from uniform: Barely 50 percent of the world’s population has access to the Internet today,” they pointed out.
Their analysis of digital evolutions yields several implications for both public- and private-sector leaders as they explore ways to enhance the state of the digital economies across the world.
According to them, more digital innovators should recognize that public policy is essential to the success of the digital economy. Countries with high-performing digital sectors, such as those in the EU, typically have had strong government/policy involvement in shaping the digital economies. So do high-momentum countries (such as Singapore, New Zealand, and the UAE), as well as many break out countries, including China, Malaysia, and Saudi Arabia.