The share of value added that potentially lends itself to electronic commerce represents around 30 per cent of GDP, most importantly distribution, finance, and business services (Pérez-Esteve and Schuknecht, 1999). E-commerce is also likely to boost international flows of many services significantly10. At present the biggest volume of electronic trade by far is business-to-business (B2B), mainly involving big firms setting up online exchanges to buy industrial inputs, such as steel, chemicals, or car components. A recent Goldman Sachs report estimates that firms’ possible savings from purchasing over the Internet vary from 2 per cent in the coal industry to up to 40 per cent in electronic components11. Yet some of the biggest potential gains from B2B may lie in smaller firms’ purchases of indirect inputs, such as telephone services, office equipment and furniture, and electricity, which together account for 30-60 per cent of firms’ total non-labour costs. By pooling the buying power of small businesses, online intermediaries can negotiate discounts. And by making the procurement process more efficient, they can also cut processing costs12. The businessto1consumer (B2C) segment is the second-largest form of e-commerce, embracing normal retail activity on the Web, such as Amazon.com. A third type of market is consumer-toconsumer (C2C), which covers auction sites, while a fourth — consumer-to-business (C2B) — involves reverse auctions, taking advantage of the power the Internet gives to customers to drive transactions (e.g. with airlines competing to give travellers best offers on tickets). Finally, business-to-government (B2G) e-commerce refers to the use of the Internet to move public procurement, licensing procedures, etc., online.
There are at least four different channels through which e-commerce may impact on developing country entrepreneurs:
i) making it easier for artisans and SMEs to access B2C world markets; ii) facilitating activity on the global market for agricultural and tropical products; iii) allowing firms in poorer countries to tap into the B2B and B2G supply chains; and iv) allowing service-providing enterprises in developing countries to operate more efficiently and to provide certain services directly to customers anywhere in the world.
OECD DEVELOPMENT CENTRE Working Paper No. 164 E-COMMERCE FOR DEVELOPMENT: PROSPECTS AND POLICY ISSUES by Andrea Goldstein and David O’Connor
To learn more about this author, visit OECD Development Centre's Website.
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