In many respects, it has been difficult to look away from the United States when it comes to the world of e-commerce; and it's not hard to see why with high profile mega companies like Amazon (NASDAQ: AMZN) and eBay (NASDAQ: EBAY) constantly dominating news and redefining businesses. Nevertheless, with the stratospheric growth of international economies like China's in addition to recent trade agreements explicitly concerning e-commerce, the international world of e-commerce may be poised to be blown wide open as consumer's direct access to manufacturers from around the world increases exponentially. In particular, the growth and expansion of China's Alibaba (NYSE: BABA) and the recent Trans Pacific Partnership have set the stage for an international e-commerce revolution.
In September 2014, Alibaba claimed the record for the largest US-listed initial public offering, raising a staggering $25 billion. Alibaba is already one of the world's largest e-commerce companies and is projected to hit $910 billion USD in gross merchandise volume by 2020, out stripping projections for both Amazon and eBay.
Alibaba's story so far has focused on differentiating themselves from the traditional giants of the e-commerce world while capitalizing on their unique position in China. Jack Ma, Alibaba's eccentric CEO, stated that "EBay may be a shark in the ocean, but I am a crocodile in the Yangzi river. If we fight in the ocean, we lose; but if we fight in the river, we win." This goal of tailoring strategy to the playing field has manifested itself in Alibaba focus on developing a business-to-business portal connecting small Chinese manufacturers with buyers domestically as well as overseas. With the goal of leveraging the expansive market power of small and medium sized Chinese manufactures, it soon had a platform that dominated the Chinese e-commerce scene and has ultimately developed into a site that is uniquely suited to attracting the attention of small business from around the world looking to find an international audience.
Much of the influence of Alibaba can be attributed to the rapid growth of China's economy, which helped facilitate a sharp rise in disposable income for the average Chinese citizen and an expansion in the consumer market. Due to limited domestic resources, this generated huge potential and enthusiasm from the Chinese side in cross-border e-commerce that Alibaba has capitalized on. Last year, Chinese e-commerce shoppers spent around 3.5 trillion on line. Digital retailing has transformed shopping and purchasing habits, opening up opportunities for Chinese e-retailers and brands that are learning to sell online instead of in department stores. This environment has allowed for Alibaba to capitalize on the opportunity to redefine the standard format of Chinese retail in which manufacturers are much less tied to the tradition of selling through brick and mortar stores, especially when compared to their counterparts in Europe and North America. This independence from physical stores has spurred an increase in cross-border purchases by China's Web shoppers to more than $20 billion in 2014 from less than $2 billion in 2010. This has impacted the localization of the flow of goods in many ways; for instance the U.S. has now become the location of choice for clothing and personal care and baby products for buyers in China, according to EMarketer. The market research company predicts that China's e-commerce market, which supplanted the U.S. as the biggest in 2013, will double in five years.
From the perspective of the United States, typically seen as the source and locus of most e-commerce ventures, Alibaba burst onto the scene with its eye catching IPO but quietly dominated the field of Chinese e-commerce for years before, building up strategic growth plans that have grown to hold significant implications to the state of e-commerce in the United States and around the world.
The significance of the future of international e-commerce has been reflected in recent geopolitical initiatives both in the widely covered Trans Pacific Partnership as well as the 2016 G-20 summit. The influence of China's e-commerce industry on global governance and the formulation of global trade regulations has inevitably increased and has pushed the geopolitical climate to one that has promise in facilitating the future growth of international e-commerce.
Historically, cross-border e-commerce has always been limited by a number of logistic issues including taxation, licensing, standards, security, and financing. These have always significantly impacted operating costs and dampened the potential for many goods to become tradable on the global market. However, the recent explosion of Chinese e-commerce has created a much greater push for standardization in international regulations.
In pursuing this, Jack Ma proposed an Electronic World Trade Platform (EWTP) at the Boao Forum for Asia in Hainan province in March 2016 that was eventually included on the agenda at the 2016 G-20 summit as part of the Strategy for Global Trade Growth.
The EWTP initiative targeted the potential of small- and medium-sized enterprises, as well as developing countries, women, and young people - in the effort to offer more convenient access to the global market by allowing them to buy and sell products and services internationally from their mobile phones. With the new regulations, the proposal hopes to lower the costs for these enterprises entering the global market and incentive their desire to innovate, greatly increasing employment rates.
Similarly, the much covered Trans Pacific Partnership also reflects significant influence from the increased relevance of international e-commerce. In the most recently ratified version of the trade agreement involving numerous major economies such as the United States, Canada, and China, the TPP required member governments to allow full cross-border transfer of information, bans forced localization of computing facilities and services, prohibits requirements to transfer technology as a condition of conducting business, and bans the imposition of customs duties or taxes on Internet traffic. All these provisions aim to increase the ease in which companies can operate online and makes strides in expanding the global capacity of international e-commerce.
The future will likely see more change in the world of e-commerce as the face of retail changes almost daily as a result of the new "Internet of Things." Companies are focused on further leveraging new technology in integrating purchases with the every day life of consumers and the international implications of these technologies holds huge potential in this changing landscape. The jury is still out on what form the international world of commerce will take after all is said and done, but it is undeniable the degree to which e-commerce has revolutionized the consumption habits of people all across the globe.