E-commerce – the 3rd Major Evolution in Global Economy?
I recently spoke on a panel about how the internet and e-commerce are transforming global business. My message was that you could make the argument that e-commerce could be considered the 3rd major evolution in the global economy since the industrial revolution. The first was the dramatic improvements in telecoms and transportation, which virtually eliminated time and distance as trade barriers. These improvements lead to the second modern evolution – the global supply chain and globally disbursed, just-in-time manufacturing models that allow countries, businesses and individuals to participate in the global economy as never before.
E-commerce can be seen as the third stage, where manufacturers and merchants connect directly with customers around the world who are actively seeking out their products. The power of search engines to find specific items for sale give consumers tools they have never had before and it gives merchants access to customers they have never had before. In fact, FedEx’s biggest day in history on Monday, December 10th, will be driven by e-commerce.
The internet is transforming the way business is done and is opening up enormous opportunities for businesses, especially small businesses, to participate in the global economy. FedEx has been saying this for years.
A new report by eBay demonstrates that –94% of the smallest 10% of commercial sellers on eBay engage in exporting. That’s a phenomenal statistic because it is so different from the Commerce Department’s overall statistic that only 1% of US companies export. Clearly, companies that adopt the internet as a part of their business model are doing far better at exporting than those that don’t
At FedEx we call this the ACCESS effect – and it’s a hugely powerful force. We see the great potential that exists for small businesses to export and are working to improve the customer experience – to make the experience of cross border e-commerce easier, more predictable and more transparent.
For example, the monetary threshold at which a person or a company has to pay a tariff to import an item, often referred to as the customs de minimis level, is sometimes illogically low. Studies have shown that some countries’ de minimis levels are so low that the administrative costs borne by customs and private sector to collect the duties outweigh the actual amount of duties collected – so its economically inefficient. Raising the de minimis also allows customs to focus its scarce resources on higher value, higher risk shipments, which improves efficiency. By eliminating the duty on low value goods e-commerce becomes cheaper, faster and more predictable, which means more people will take advantage of it. FedEx works on issues like this within international trade agreements to make it easier for small and medium size businesses to join the global market.