Pros and Cons of The Digital Ecomnomy
Can digitalizing businesses be as important as they say? Losing the social factor in business, is it worth it? Let's look at the pros and cons of the digital economy
Starting a business in a country where most aren’t digitally enabled can be daunting for any entrepreneur. However, it also presents a lot of opportunities. Digital technologies have already become crucial for commerce in the country. A recent review of the Ethiopian digital economy by Cepheus Capital reveals that there are over 570 businesses engaged in different sectors of the digital economy.
Internet penetration and literacy are increasing across the nation. It’s becoming more evident that businesses must look for digital solutions to adapt to a dynamic marketplace. The growing digital economy has facilitated the growth of various companies in different sectors, ranging from Fintech to E-learning.
Cepheus’ review of the digital economy in Ethiopia indicates a growth in the number of companies providing diverse digital services like e-commerce, transportation, sector-tech, and other enabling assistance. Few "digital disruptors" with broad market acceptance and a sizable customer base created significant income. This phenomenon happened in a digital space where the majority of businesses are still small-scale in nature. There aren’t as many businesses that adhere to digitizing their businesses in Ethiopia as in many developed countries. Nonetheless, it is important to understand the value and the problems that come with it.
Why is it important?
Yes! You guessed it, information. Relevant data is an essential thing in business these days. Consumers now have access to more information and options because of the Internet. For instance, it facilitates price comparisons amongst vendors. Additionally, it puts knowledge at your fingertips.
The other most important thing for businesses or consumers is time and how they spend it. In the past, if you wanted supplies, you had to travel to a store and buy them. Today, you can have your orders delivered a day after you made an online purchase. For example, Jemla, a startup firm in the B2B sector, is helping bridge the gap between retailers and FMCG (Fast Moving Consumer Goods) manufacturers/importers by making product sourcing effortless.
A digital marketplace helps reduce the cost of labor for businesses and the cost of goods for consumers. Companies can avoid paying for expensive facility rentals by conducting most of their businesses online. A digital economy enables businesses to bypass a portion of the supply chain, and deliver customized goods directly to customers from factories or warehouses instead of stores.
A thriving digital economy contributes to development as it helps new businesses to penetrate different markets. A business person who has an innovative idea may develop a new product that competes with established companies. Besides being an asset for companies, government, and nonprofit organizations benefit from the generation of data on the economy.
The drawback of a digital economy
Nowadays, a continuously worrisome issue is privacy. Data collection and use is a very profitable industry. For example, Facebook gathers a wide variety of user data, and political interests have purchased these data to make targeted campaigns.
Even though it has benefited startups in this highly competitive market, there is still a problem of monopolization. For example, due to Amazon’s monopoly in the international market, many businesses use the Amazon marketplace to reach customers who regularly shop there. Google’s and Facebook’s brand loyalty is also high in their respective markets. Because of such dominance, few tech giants are now tremendously dominant and profitable.
Another drawback of a digital economy is the gradually diminishing sense of community. The usual process of going to the store, interacting with people, forming friendships, and the like are becoming things of the past. This might be a huge problem in countries such as Ethiopia, which prides itself on being a tight-knit community.
Even though there are some issues with growing a digital economy, there is no doubt that it has helped countless businesses prosper.