A recent report titled ‘e-Conomy SEA’ by Google, Bain & Company, and Temasek examines the impact of e-commerce on the economy, with a focus on Southeast Asia. It emphasises that e-commerce is a significant catalyst for creating jobs, boosting trade, promoting digital transformation, and enhancing consumer access to goods and services—key factors that are essential for long-term economic development.

E-commerce has massive potential for economic transformation in the digital age. The data generated by e-commerce platforms sets up avenues for innovation and optimised resource allocation. MSMEs can use these valuable insights into customer behavior, trends, sales data, to demonstrate their business potential and improve business strategies.

As more consumers and businesses adopt digital platforms, e-commerce plays a significant role in linkages across numerous sectors, including retail, logistics, and financial services. By providing businesses with digital tools such as online payment gateways, digital marketing solutions, and automated inventory management, e-commerce allows companies to streamline their operations.

Real time data generated by e-commerce platforms provides crucial support to businesses in marketing, nationally and globally, and reverse feedback on demand, allowing e-commerce businesses to adapt quickly, optimise inventory, fine-tune market strategies, and align offerings tuned with current market demand. Feedback from customers, such as reviews and ratings, also provides insights into current trends.

E-commerce platforms track the frequency of certain search terms. If a particular product or category sees a surge in searches, this indicates growing consumer interest and a demand signal. Furthermore, fast-moving products, those that run out of stock quickly or require frequent restocking, reflect high demand.

E-commerce supports MSMEs by improving access to relevant sections of markets. competing more effectively with larger companies, with data on last mile linkages.

E-commerce has played a significant role in the economic growth of China, Japan, South Korea and Europe etc. In the United States (US), Silicon Valley has become a hub for e-commerce-related technologies, driving investment in startups and innovative solutions with related platforms.

E-commerce platforms like Alibaba and JD.com helped Chinese manufacturers reach global markets directly, filling their shelves, bypassing traditional trade barriers. This opened up opportunities for small and medium-sized enterprises, facilitating China’s economic growth innovating according to consumer demands.

Japan has used e-commerce to transition from traditional retail to digital platforms. Major e- commerce giants like Rakuten have not only reshaped how people shop but also allowed global companies to tap into the Japanese market.

In Southeast Asia, e-commerce has contributed to the growth of the digital economy, enabling countries like Singapore and Indonesia to become key players in global trade. With platforms like Shopee and Lazada, Southeast Asia has seen cross-border e-commerce become a significant growth area, boosting trade and investment.

In India, changing geopolitics can significantly help accelerate e-commerce growth. With changing geopolitical factors such as the US-China trade tensions, Trump’s changing tariff architecture, India can position itself as reliable manufacturing hub for global markets.

India has been actively engaging in trade agreements with countries in Asia, West Asia and Europe, which can make it easier for Indian e-commerce companies to expand into new markets. India remains a top destination for foreign direct investment bolstered by various policies like performance-linked incentives, Make in India and Make for the World.

Government introduction of more favorable tax policies, e-commerce guidelines attuned to the global tariff architecture and data protection laws can help global e-commerce companies to operate in India and for Indian companies to sell abroad.

The growth of e-commerce has spurred significant advancements in economic growth. Innovations in goods and services supported by AI techniques, improved the online shopping experience and helped technology adoption. E-commerce has also empowered entrepreneurs to start businesses with relatively low overhead costs, allowing level playing field for smaller businesses, especially women, craftsmen and artisans and rural entrepreneurs, in diversified sectors like textiles, handicrafts, women support groups, export hubs, rural and remote areas with access to national and global markets, fostering inclusive growth. The regulatory architecture also needs realignment in the present changing geo-political scenario. By creating an ecosystem of innovation, efficiency, and global competition, e-commerce can play a pivotal role in transforming economy in the digital world.

This article is authored by Dhanendra Kumar, chairman, Competition Advisory Services India LLP and former executive director, World Bank for India, Sri Lanka, Bangladesh and Bhutan. With inputs from Subhi Pastor.