Digitalization of global trade

 

   Digitalization today promises another transformation of international trade, with equally far-reaching consequences for economies, companies and individuals. A review of the evidence shows that global trade is in the early stages of this transformation, with some industries and business models already deeply affected.

 

   It is possible to overestimate the short-term implications of the digitalization of global trade for the average firm; but it is just as easy to underestimate the long-term transformative potential of these technologies for virtually everyone. Companies must recognize digitally enabled trading as a key growth area where early preparation can pay significant long-term dividends.

 

   A seemingly middle-of-the-road approach in which companies assess their commitment to digitally enabled trade, integrate their digital and global strategies, and base their choices on a clear understanding of how the relevant policy context is evolving and could be shaped.

 

 

   Definition of digital trade

 

   Digitalization affects all types of economic activity, so in a sense, all trade has turned into e-commerce. We define digitally enabled trade as cross-border economic transactions in which digitalization has significantly changed "How" trade occurs or "What" is traded. We divide digital trading into three categories:

 

Digitally sold trade changes the "How". Digital sales and marketing platforms, either a company’s own website or an external offering like Alibaba’s Electronic World Trade Platform (eWTP), dramatically reduce the transaction costs of extending a company’s existing offering into a foreign market. Trade still looks the same—the same goods and services cross the border—but it happens only because digitization has enabled a cost-efficient matching of buyer and seller based in different countries.

 

Digital commerce is changing the “What”. This is the cross-border trade of digital offerings that replace or complement existing products and offline services. Complete replacement has occurred, for example, thanks to Kindle e-readers, streaming services such as Netflix, and Adobe SaaS solutions. Additions have emerged in the form of value-added digital services that add value to physical goods or autonomous services—for example, BMW's ConnectedDrive platform for predictive maintenance or Caterpillar's remote diagnostic services.

 

Digital commerce is changing both the "How" and the "What". At its core is a completely new offering, entirely based on digital technology. This is a global offering of new services that have been completely digital from the very beginning. The channels are digital, the offering is digital, and the value proposition is based on delivering and analyzing digital data. This is the very definition of digital giants like Google, Facebook and Uber.

 

Huseyn Huseynov

Founder, General Director