Where the Digital Economy Is Moving the Fastest

Harvard Business Review recently published an article titled ‘Where the Digital Economy is Moving the Fastest’. The following is from the article. Link to article at bottom of post.

The transition to a global digital economy in 2014 was sporadic – brisk in some countries, choppy in others. By year’s end, the seven biggest emerging markets were larger than the G7, in purchasing power parity terms. Plus, consumers in the Asia-Pacific region were expected to spend more online last year than consumers in North America. The opportunities to serve the e-consumer were growing – if you knew where to look.

These changing rhythms in digital commerce are more than a China, or even an Asia, story. Far from Silicon Valley, Shanghai, or Singapore, a German company, Rocket Internet, has been busy launching e-commerce start-ups across a wide range of emerging and frontier markets. Their stated mission: To become the world’s largest internet platform outside the U.S. and China. Many such “Rocket” companies are poised to become the Alibabas and Amazons for the rest of the world: Jumia, which operates in nine countries across Africa; Namshi in the Middle East; Lazada and Zalora in ASEAN; Jabong in India; and Kaymu in 33 markets across Africa, Asia, Europe, and the Middle East.

Private equity and venture capital money have been concentrating in certain markets in ways that mimic the electronic gold rush in Silicon Valley. During the summer of 2014 alone $3 billion poured into India’s e-commerce sector, where, in addition to local innovators like Flipkart and Snapdeal, there are nearly 200 digital commerce startups flush with private investment and venture capital funds. This is happening in a country where online vendors largely operate on a cash-on-delivery (COD) basis. Credit cards or PayPal are rarely used; according to the Reserve Bank of India, 90% of all monetary transactions in India are in cash. Even Amazon localized its approach in India to offer COD as a service. India and other middle-income countries such as Indonesia and Colombia all have high cash dependence. But even where cash is still king, digital marketplaces are innovating at a remarkable pace. Nimble e-commerce players are simply working with and around the persistence of cash.

To understand more about these types of changes around the world, we developed an “index” to identify how a group of countries stack up against each other in terms of readiness for a digital economy. Our Digital Evolution Index (DEI), created by the Fletcher School at Tufts University (with support from Mastercard and DataCash), is derived from four broad drivers: supply-side factors (including access, fulfillment, and transactions infrastructure); demand-side factors (including consumer behaviors and trends, financial and Internet and social media savviness); innovations (including the entrepreneurial, technological and funding ecosystems, presence and extent of disruptive forces and the presence of a start-up culture and mindset); and institutions (including government effectiveness and its role in business, laws and regulations and promoting the digital ecosystem). The resulting index includes a ranking of 50 countries, which were chosen because they are either home to most of the current 3 billion internet users or they are where the next billion users are likely to come from.

The image below is self-explanatory.

HarvardBusinessReview_Digital commerce

Link to Harvard Business Review article.

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