Digital Transformation_Issue 3_E-commerce
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<BR>*BANKABLE INSIGHTS*Digital Transformation
<h2 style="font-size: 1.5em; color:#69BE28;">**E-commerce edition**</h2>
The pandemic has without question accelerated the growth in B2B e-commerce to unprecedented levels. Estimated between four to six times the value of the B2C market, today B2B e-commerce has become the fastest growing segment for many companies.
As B2B buyers become more comfortable with sourcing online and realise increased efficiencies across the supply chain, businesses are making it a priority to ramp up their digital preparedness. B2B buyers are seeking the same user experience as B2C customers, resulting in numerous disruptions, especially around development of new payment options and new forms of B2B financing.
However, it is challenging for businesses to participate in the B2B e-commerce landscape without the adoption of digital platforms for their business transactions. Standard Chartered has been helping B2C and B2B organisations across Asia, the Middle East and Africa manage these transformations and simplify their journey to e-commerce.
In this edition of Bankable Insights, you will find several examples of how Standard Chartered has helped clients to capitalise on B2B e-commerce trends by implementing the right technology solutions to suit their operating models.
We look forward to hearing your thoughts on the articles and to explore how we can work with you on your e-commerce journey.
<BR>Transforming B2B into B2B e-commerce
Transforming B2B into B2B e-commerce
More and more companies are embracing B2B e-commerce, and there are two distinct trends driving this boom.
How to capitalise on the next great opportunity
The year 2020 may come to be seen as a watershed in the history of e-commerce due to the impact of the COVID-19 crisis.
The boom in online consumer marketplaces and delivery services received much of the world’s attention, but in many ways this was simply the accelerated evolution of an ecosystem that had been steadily growing since the 1990s. For businesses – many of which were caught off-guard by the pandemic – the outbreak has been an existential crisis and the related transformation has been profound.
For B2B organisations, COVID-19 triggered a race against time to migrate sales operations online and at scale, optimise sourcing, create real-time inventory information and automate procurement flows.
From the beginning of the crisis, it was clear that companies that had invested in digitalisation and e-commerce prior to the crisis had the upper hand.
Often, the notion of crisis management goes hand-in-hand with patchwork solutions and short-term costs. In the case of traditional B2B organisations, however, we’re seeing the long-lasting transformation of business strategies designed to invest in a vast well of future opportunity including embracing e-commerce. And regardless of where they sit on the adoption curve, B2B e-commerce has now become a key priority for the digital transformation of organisations as they begin rebuilding with a focus on becoming more resilient.
A customised and effective e-commerce solution can enable organisations to scale their businesses by expanding into new markets, gaining access to a larger customer base and by opening new sales channels. This is critical for businesses to succeed and future proof themselves. Digital leaders in B2B significantly outperform their peers in terms of revenue growth and earnings.1 The pandemic has reinforced this reality.
For these and other reasons, B2B e-commerce is the fastest growing segment for many companies and is now worth somewhere between four to six times the value of the B2C market. But if we look at the sheer potential of e-commerce across all channels, it’s phenomenal.”
Global Product Lead – Mobile Money & E-Commerce, Standard Chartered
Waking up to the potential
More and more companies are waking up to this potential.
According to McKinsey, preference for digital sales channels is twice as high as before the pandemic, and digital interactions with customers are now seen as three times more important than traditional face-to-face relationships. Remote selling has become the norm.
Two distinct trends are driving this e-commerce boom, Mahesh Narayan says. The first is the ‘direct-to-consumer model’, in which companies from small retailers to multinationals are setting up their own portals and going direct to consumers, product distributors or dealers. The second is “the rise of vertical or specialised marketplaces” – online portals that are creating ecosystems, bringing multiple buyers and suppliers on a single platform and offering a deep range of products in a particular category or industry.
To a degree, the implementation of these models has been made simpler for B2B organisations because they’ve been able to piggyback on years of beta-testing and development by B2C technology platforms. Even so, individual businesses still face significant adoption challenges.
Reimagining business relationships
Replacing face-to-face interactions – which until recently was a crucial element of building business relationships – has been particularly difficult.
B2B sales cycles are long and more complex. Also, when it comes to placing orders, they will be higher in quantity of products or services, have much more complicated requirements, not to mention the higher and variable value of transactions.
Therefore, companies need to make the right choice when it comes to investing in a B2B e-commerce platform. This is also driven by the fact that B2B customers tend to seek the same user experience as B2C customers when it comes to a speedy check out process, flexible and trusted digital payment options and fast delivery.
Payment is a key building block of any business transaction. When it comes to B2B digital payments, companies need to be cognizant of the payment trends in various countries, so they have the optimal mix of payment methods to satisfy their customers. Standard Chartered has been helping B2C and B2B organisations across emerging markets manage these transformations, simplifying their journey into e-commerce / m-commerce and enabling them to embrace digitalisation.
In Singapore alone, there are multiple payment options for a buyer to pay a seller. Now imagine a multinational with a presence across several countries wanting to accept various digital payments from its customers. They will be confronted with an ever-growing list of payment options and will need to tie up with multiple service providers. To simplify all of this, Standard Chartered introduced a global digital collections gateway whereby businesses can now work with the Bank as their ‘one-stop shop’ to accept a variety of payment options from their customers all through a single platform across multiple markets.”
Global Product Lead – Mobile Money & E-Commerce, Standard Chartered
Digitalisation doesn’t necessarily require significant investment. During the pandemic, Standard Chartered developed innovative “lite-touch” solutions for its clients that required no technical integration, enabling even companies without online portals or mobile applications to embrace digital payments through QR codes and payment links.
Innovate and collaborate to make a great leap forward
We are now seeing a “leap forward to a more connected and flexible commercial ecosystem,” Mahesh Narayan said.
Accelerated by the pandemic, technologies such as data analytics, the Internet of Things and Artificial Intelligence are becoming integrated into production and supply chains. With organisations rapidly adopting digital technologies in their operations, payments cannot be left behind. Companies need to focus on investing and accelerating their e-commerce strategy in response to their evolving customer needs combined with the emerging trends in digital payments.
Increasingly, companies are building resilience by integrating platforms and services to develop omni-channel relationships with customers, rather than sticking with a linear approach that’s vulnerable to disruption. Becoming nimbler and more responsive to customers is now a key differentiator for commercial success.
“It’s important that both B2B and B2C sellers invest in real-time insights about their buyers so that they can constantly adapt and change,” Mahesh Narayan pointed out. “They cannot say ‘this is my strategy today and for the next two years’ if they want to stay resilient.”
The pandemic has accelerated digital transformation to create a golden opportunity for B2B organisations. The ball is now in the court of B2B leaders to commit to digitising their traditional models and deriving more competitive advantage than their slower-moving peers.
<BR><BR>Navigating Asia’s B2B e-commerce surge
Navigating Asia’s B2B e-commerce surge
Asia may be leading the transformation in B2B e-commerce but there are still untapped opportunities.
Globally B2B e-commerce is still a growing space, but Asia is leading the transformation.
If 2020 becomes known as the year e-commerce erupted, then Asia will be remembered as the epicentre of the transformation. In a region that was already emerging as the global hub for e-commerce in 2019 – the top seven countries for online consumer spending growth were all in Asia – the COVID-19 pandemic accelerated the pace.
Now, as broadband access widens, 5G networks mushroom and Asia’s middle-class population eclipses its global counterparts, that dominant position is only likely to strengthen.
By the end of 2021, Asian e-commerce sales are forecast to reach USD3.5 trillion1, more than three times higher than those in North America, the second-largest region.
The surprise has been the sheer pace at which this has happened. E-commerce will continue to grow exponentially in Asia. It’s even starting to impact more traditional industries amid a shift in consumer habits, regulatory developments and innovations from banks and fintech companies.”
Global Product Lead – Mobile Money & E-Commerce, Standard Chartered
Undoubtedly, the pandemic has accelerated progress. A Bain-Facebook survey found that 85 per cent of people in the region tried new apps for the first time, with e-commerce, food delivery and digital payments among the most popular categories.
Online grocery sales in Southeast Asia grew nearly three times during the outbreak.
The “Double Five” online shopping festival in Shanghai in May generated USD2.2 billion in orders in 24 hours. And sales during Alibaba’s annual Singles Day shopping event reached a record USD74 billion.2
Despite the remarkable pace of transformation, there are still abundant untapped opportunities.
According to a Bain & Co. study, three-quarters of micro, small and medium-sized enterprises in ASEAN see the potential of digital integration, but only 16 per cent are realising the full potential of technology. A Google-Temasek Holdings report meanwhile estimated that digital integration could deliver a USD1 trillion rise in the region’s GDP by 2025, while its internet economy alone could be worth USD240 billion by the same year.
As small and medium-sized businesses start digitising their lending operations, FIs are also expanding existing platforms with new services and technologies to address their needs.
We're doing quite a few things in this space. One is we're building a state-of-the-art single scalable payment engine. This is a global payment platform that supports both B2B and B2C domestic and cross border payments. We are also investing heavily in the e-commerce space and providing consistent and scalable solutions for online collections, escrow accounts, QR codes and real time direct debits.”
Managing Director, Head of Cash Management, Singapore and ASEAN,
Standard Chartered partnered with Deutsche Post DHL Group to co-create a new online collections solution for their DHL Express Division that would allow their customers across Asia to make online payments in local currencies for shipping charges and duties and taxes, using local payment methods (including instant / QR payments, bank transfers, eWallets and cards).
The solution is live across six countries and expanding.
We also supported them with digitisation of their in-store collections and payments on delivery using QR code and instant payments powered by our proprietary app and integration with the hand held devices of their couriers.
This provided DHL with a cost-effective solution, enabling elimination of cash in the last mile service, access to a variety of local payment methods across multiple geographies and automation of their reconciliation, all through a single integration and a single contract with Standard Chartered.
There are also opportunities for B2B e-commerce technologies to not only help B2B vendors migrate online, but to also optimise both the selling and purchasing process for business partners. Hence, a big area of focus is B2B payments because establishing payment terms or financing is fundamental to B2B e-commerce transactions.
B2B e-commerce revenues rose 20 per cent from the beginning of the crisis.
Digital payments surged, both in advanced digital markets and traditionally cash-dominated countries. GCash in the Philippines, for instance, reported a 30 per cent increase in payments. SC Pay – Standard Chartered’s payment-processing engine – saw its share of fast payments in Hong Kong grow to 23 per cent in the first half of 2020, from 10 per cent a year earlier. The buildout of SC Pay into a single global payments system will be complete in three years.
“One of our clients in Hong Kong is a telco,” Kanwar said. “Traditionally they had sent paper bills customers, which were both businesses and consumers. The customers would then make a payment through cheque or cash electronic payments. We helped them transform by printing a QR code on their paper bills. This enabled customers to simply scan the QR code and make an instant payment, cutting down on cash and cheques. In turn, that made the collections more efficient, cutting down the cycle time.”
Singapore mall operator CapitaLand introduced a new e-commerce platform featuring the wares of retailers whose shops had been forced to shut during lockdown. Other businesses used the crisis to develop new digital commercial collaborations. In Indonesia, e-commerce company Bukalapak teamed up with ride-hailing firms Grab and Gojek to run deliveries. Gojek partnered with Indonesia’s Agriculture Ministry to help local farmers and market vendors move their services online – and saw rice sales from partnership markets increase 30 per cent. Vietnamese e-commerce platform Sendo began partnering with overseas companies, including giants like Unilever and Proctor & Gamble, to expand the range of products available to local shoppers.
On the B2C front, there has already been a huge amount of innovation,” Kanwar said.
“B2B has lagged because it’s more complicated. Going forward, B2B innovation is going to be on how do I digitise my entire supply chain? And how do I start interacting with my suppliers on the one side, as well as let's say distributors and consumers on the other side, completely through digital means.”
Moreover, progress is uneven across the region. While countries such as China, Singapore and Thailand have surged ahead in e-commerce, other parts of Asia remain underserved. Internet penetration is still low in countries such as Laos (43 per cent), Cambodia (50 per cent) and Myanmar (39 per cent), and many nations also lack the digital, regulatory and financial infrastructure to drive the growth seen elsewhere in the region. Furthermore, the immediate social and cultural expectations of B2B e-commerce users in some of these countries are not being met by existing technologies that have evolved from the West.
But with its extensive experience across Asian markets, Standard Chartered is developing solutions to overcome these obstacles. In India, for example, the bank has backed SOLV, a 360-degree B2B marketplace platform helping the country’s micro, small and medium enterprises (MSMEs) connect and do business with a large network of buyers and suppliers, build their credit scores, source working capital finance and access business services such as logistics.
As lockdowns threatened to cripple businesses, SOLV drew on its network of manufacturers and delivery channels to get essential goods to small village shops, resident welfare societies, NGOs and small hospitals, providing supplies to thousands of families through the SMEs on the platform. The SOLV adoption rate grew threefold during the first four months of the crisis, signalling both a rising affinity for digital platforms and a greater awareness of the need to build future resilience.
“While the broad trend is digitisation for every market, the underlying solutions that are being built are very country specific,” Kanwar said. “That's where banks like Standard Chartered are trying to take the lead. We’re not only investing in all of these technologies across the region, we’re also trying to make sure that from our corporate client perspective, we present a standardised set of solutions and use cases no matter which country they deal with.”
<BR><BR>Transforming the last mile in Middle East’s
Transforming the last mile in Middle East’s e-commerce boom
The Middle East e-commerce market is booming and the priority for businesses is to ramp up their digital preparedness and take advantage of the boom.
The e-commerce market in the Middle East is booming. Triggered in part by pandemic lockdowns, consumers and businesses are shifting to digital channels, putting e-commerce sales on course to reach USD69.2 billion this year1, from USD4.3 billion2 just four years ago.
In some of the region’s markets, transformation is unfolding at a rapid pace. An Ernst & Young survey found that 92 per cent of consumers in the United Arab Emirates (UAE) and Saudi Arabia had changed their shopping habits in 2020. Meanwhile, a separate survey across six regional countries including Jordan, Lebanon and Egypt found that between one-third and half of people are shopping online more frequently.
Businesses that have embraced this change have been rewarded with a wave of growth. Majid Al-Futtaim Retail, which operates malls and retail brands across the region, accelerated its online marketplace launch, expanded its network of fulfilment centres, “dark stores” and last-mile delivery operations, and began using advanced analytics to monitor and re-stock inventory. Online orders at its Carrefour grocery business jumped 800 per cent.
Mall developer Emaar, meanwhile, followed the lead of peers in Asia by establishing an online marketplace where shoppers could browse and buy the products of tenants forced to shut during lockdowns.
As digital channels widen, more people are swimming in.
Almost half of the region’s consumers now prefer making online payments to using in-person cards or cash, a Standard Chartered survey found, marking a major shift from traditional transaction habits.3
Close to three-quarters of respondents in the same poll said the pandemic had made them more positive about online shopping.
One thing that we are seeing is the conversion of last mile transactions from cash to digital. Immediate payments, for example. This is where small value payments up to 10,000 dirhams can actually be made instantaneously. I think that will help the B2B space quite a bit.”
Regional Head, Transaction Banking Sales, AME at Standard Chartered
B2B e-commerce, typically slower to take off than its retail counterpart, is expected to grow more than twice as fast as the B2C sector through 2030, according to Frost & Sullivan.4
The rapid growth of digital payments is playing an important role in this growth.
Even with e-commerce platforms, what was happening in the region was that a product was delivered to your house and the payment was still being made in cash. Now we are seeing a lot of adoption of cashless alternatives like mobile wallets – Bahrain and Jordan are leading this right now – and in instant payments, which will help the B2B space. All this is being further helped with plug and play connectivity being fostered using APIs.”
Head of Cash Products for Africa and the Middle East, Standard Chartered
Indeed, the digital payments market in the Middle East and North Africa is forecast to grow at a compound annual rate of 5.6 per cent through 2025, driven by the growth of providers, platforms and payment tools.5 Here, the use of APIs is becoming a critical factor for both B2C and B2B e-commerce players in the Middle East.
“We have an airline client, for example, that needs payment notification in order to release a ticket,” Rathore said. “That’s something that we’ve been able to address using APIs, implementing them such that the ticket is released once the payment goes through.”
According to the Standard Chartered survey, nearly two-thirds of people in the UAE expect the country to be cashless by 2030.Despite this impressive growth, digital transformation in the region still faces formidable challenges.
While two-thirds of customers in the Middle East now expect access to digital services when shopping or doing business, 67 per cent of the region’s small and medium enterprises offer no online sales at all, according to a survey by logistics firm UPS.6 Gartner, meanwhile, reported that only 15 per cent of businesses in the region have an online presence.
Trade barriers remain high in parts of the Middle East, and cross-border digital payments are still in the nascent stage, making the logistics of shipping goods difficult for online retailers and B2B operators in a region where 90 per cent7 of e-commerce demand is for overseas products. The EU reported that the largest number of new trade barriers were erected in the Middle East in 2019.8 High tariffs and complex regulatory regimes add to the challenge, making it more difficult for startups to get established, and existing businesses to compete with multinational e-commerce operators.
Governments in the region also have an important role to play by building the necessary digital infrastructure and improving e-governance and digital services. Many of the region’s countries still need to integrate offline services such as transport and utilities with online payment gateways. This would not only help build resilience and accelerate the digital transformation but also build trust in the machinery of e-commerce.”
Syed Khurrum Zaeem
MD and Head of Trade and Transaction Banking AME at Standard Chartered
Greater collaboration between banks and fintechs
Through banking-as-a-service, digital platforms and ecosystems such as e-commerce operators can offer their own branded financial services such as loans and credit cards to expand their businesses, backed by Standard Chartered’s banking technology and strong balance sheet.
The UAE has emerged as a regional trailblazer, and during the pandemic the country cemented its place as the Middle East’s leading e-commerce hub.
The country’s first B2B e-commerce marketplace – DXBUY9 – launched during the crisis, aiming to fill supply-chain gaps, link suppliers with deliveries and reduce sales and logistics costs. UAE-based marketplace InstaShop10, meanwhile, onboarded 500 new sellers since the pandemic began, highlighting the value of adopting external partners who can solve multiple pain points at once.
“The priority for businesses in the Middle East must now be to ramp up their digital preparedness and take advantage of third-party solutions,” added Iqbal. “Reacting quickly in this fast-changing environment is essential, and if companies are decisive and choose the right partners, they will be well positioned to ride the region’s growing e-commerce wave.”
<BR><BR><BR><BR><BR>Making it easier for businesses in Africa to join the B2B e-commerce bandwagon
Making it easier for businesses in Africa to join the B2B e-commerce bandwagon
Africa presents vast opportunities in e-commerce but businesses must overcome challenges around infrastructure, logistics and financial inclusion.
Africa presents vast opportunities in e-commerce.
Probably unknown to many, Kenya and Uganda were the first countries to introduce mobile payments in the mid-2000s. And it is the continent’s early history with mobile payments that is paving the way for it to become a frontrunner in e-commerce, with the market estimated to double in size to USD75 billion by 2025.1
Demand and supply side dynamics
On the demand side, consumers are shifting to online commerce as mobile connectivity increases.2 Covid-19 has accelerated that trend and increased interest in contactless transactions.
More than 30 per cent of consumers surveyed in Nigeria and Kenya said they are shopping online more frequently amid the pandemic.3
In South Africa, where e-commerce sales were forecast to more than double in 2020,4 64 per cent of consumers made their first online grocery purchase and 53 per cent bought goods from an online pharmacy for the first time.5
Meanwhile, online marketplace Jumia, which operates in several African countries, reported a 22.8 per cent on-year increase in active consumers in the nine months to September 2020.6
This has laid fertile ground for a proliferation of e-commerce tools and platforms in the B2C space.
A McKinsey survey of key African economies during the pandemic found that more than 30 per cent of businesses were increasing the use of online and mobile banking tools, such as those from Kenyan mobile money service M-Pesa and payments provider Interswitch.
On the supply side, we are seeing the emergence of technologically enabled business ecosystems – linked through digitally based platforms that make it easier for them to collaborate dynamically with other enterprises and remove much of the friction involved in joint ventures and other cross-boundary collaboration. In November, the Economic Commission for Africa introduced the African Trade Exchange in November – a B2B e-commerce platform that promises to strengthen the region’s supply chains.7
In Kenya, Twiga Foods widened its reach through a partnership with Jumia, enabling shoppers to buy fresh produce and processed foods at lower prices through Jumia’s online platform.8
This along with other partnerships saw Jumia post a fourfold increase in grocery sales last year.9 Pan-African payments provider Flutterwave, meanwhile, launched an e-commerce portal enabling offline retailers to set up online shops.10, 11
Sokowatch, which has a network of over 16,000 shops and kiosks across nine cities in East Africa,12 reported a surge in new shop partners after they offered tech-enabled same-day deliveries.13
In Nigeria, agritech company FarmCrowdy launched an e-commerce platform that enables users to buy fresh foods directly from farmers.14 The platform processed 3,000 orders in the first 90 days.15
Across the continent, there is considerable innovation taking place at the private and public level. In Senegal, a public-private partnership16 formed during the pandemic to facilitate delivery of essential goods and services through e-commerce. In Uganda, platforms have been launched to link informal operators with established marketplaces and to help remote communities access market vendors using local transport.
Some central banks, such as the Central Bank of West African States, have implemented measures to cut the transaction costs of electronic payments, while the adoption of the pan-African payment and settlement system as part of the African Continental Free Trade Area (AfCFTA) is a major step towards the integration of digital financial services.
While e-commerce thrives in some markets, others remain underserved.
Both B2C and B2B businesses have to battle basic infrastructure gaps and inefficient logistics in many areas, while informal home-address conventions make deliveries complicated. This, coupled with persistent doubts about the reliability and security of e-payment systems, has left a lingering absence of trust in e-commerce.
At the regulatory level, much needs to be done. Currently, only 20 of 54 African nations have enacted online consumer protection and data management laws,17 while there is also an urgent need for policies to enable cross-border commerce. Some nations are discussing taxation of mobile money users, which could limit their growth.
Problems like these account for the fact that e-commerce sales still represent just 1 per cent of all sales in Africa, compared with almost a quarter in China.
While the pandemic triggered social changes that favour e-commerce, businesses still require much higher levels of mainstream consumer adoption and retention to build viable businesses.
Emergence of central ecosystem leaders
Financial institutions have the infrastructure, network and capabilities to emerge as central ecosystem leaders. Standard Chartered has been working across the continent to help businesses overcome these challenges.
We were one of the first banks to partner with M-Pesa. We forged strategic partnerships with major mobile wallet providers across Africa to support businesses with cashless disbursements and collections through mobile wallets of unbanked or underbanked individuals. We introduced an innovative solution to enable simpler, safer and easier access to financial services for our corporate clients and the community, driving financial inclusion through digitisation across the continent. Additionally, with the growing importance of e-commerce in Africa, we are introducing “Straight2Bank Pay” our omni-channel global digital collections gateway, enabling businesses to accept a variety of digital payment options from their customers.”
Global Product Lead – Mobile Money & E-Commerce, Standard Chartered
Meanwhile, Standard Chartered has partnered with telecom giant Airtel Africa to launch a service – initially in Kenya, Uganda, Zambia and Tanzania – enabling Airtel customers to make real-time bank account deposits and withdrawals, receive international transfers and access savings products direct to their mobile wallets.
Corporate clients can use the service to make bulk disbursements such as salary or supplier payments direct to Airtel wallets, cutting out the risk many people in Africa face of travelling long distances with cash.
In Nigeria, Standard Chartered has collaborated with Visa to run a campaign to provide secure cashless QR payments through the Bank’s digital banking mobile app and the Standard Chartered Visa debit card, to promote the adoption of e-commerce solutions.
Across Africa, the pieces of a well-developed e-commerce ecosystem are falling into place, but like in many other emerging markets, financial inclusion is a challenge. A cashless future is important for e-commerce because both B2B and B2C businesses may be missing out on a growing segment of customers who lack traditional banking resources. Standard Chartered is already developing solutions to overcome these obstacles and also has a well-established network across sub-Saharan Africa. By partnering with us, businesses in Africa can immediately start serving underbanked individuals and businesses, in an efficient manner.”
Syed Khurrum Zaeem
Head of Trade & Transaction Banking, Africa & Middle East, Standard Chartered