New research suggests that e-commerce has increased the resilience of Indonesian small businesses in the age of COVID.
Online businesses were more likely to survive the pandemic, and their profits rebounded more quickly.
Small businesses and entrepreneurs also need other kinds of help, including economic support and training.
Many emerging market economies are still in the throes of the battle against the COVID-19, despite the advances made with vaccines. Indone…….
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- New research suggests that e-commerce has increased the resilience of Indonesian small businesses in the age of COVID.
- Online businesses were more likely to survive the pandemic, and their profits rebounded more quickly.
- Small businesses and entrepreneurs also need other kinds of help, including economic support and training.
Many emerging market economies are still in the throes of the battle against the COVID-19, despite the advances made with vaccines. Indonesia is no exception. It is more important than ever to prepare Indonesian micro, small, and medium enterprises (MSMEs) to survive and thrive in the context of a disease that may be here to stay.
Our research suggests that e-commerce may be one way to help Indonesian entrepreneurs do this. In December 2020, the World Bank – in collaboration with Shopee – surveyed more than 15,000 digital merchants in Indonesia. All had made 30 or more transactions since joining the platform. The vast majority were MSMEs, with annual sales revenues in 2019 of less than IDR 50 billion. The survey asked respondents about the impact of the pandemic on their business operation and performance, how they coped with the pandemic, and government and business support they received and wanted to receive.
Key findings about e-commerce
One of our key findings was that digital merchants have been far more resilient in the COVID-19 pandemic, compared with firms that operate mainly offline businesses. Close to 80 percent of the digital merchants surveyed kept their business open throughout 2020 when the pandemic first hit Indonesia in March. This proportion is much higher than offline firms, of which less than four out of ten kept their businesses open.
Close to 80% of businesses of digital merchants surveyed kept their business open throughout the pandemic
Image: World Bank
Not only were digital merchants better able to sustain their operations during the pandemic, but their businesses rebounded more quickly. On average, overall sales of digital merchants rose to pre-pandemic levels around six months after the first peak of cases in Indonesia. At this point, most offline firms were still experiencing more than than a 20 percent drop in their year-on-year sales. Firms who made early investments in digital adoption, including already using, starting to use, or increasing their use of internet, social media, specialized apps, or digital platforms, recovered more quickly.
Several factors may explain why digital merchants have been more resilient: the sectors digital merchants are operating in; the ability of digital merchants to operate with only a few workers because of the nature of their technology; and the fact that they could reach customers across the country.
Our analysis found that e-commerce was also a valuable supplemental source of income for many new merchants during the pandemic. In Indonesia, 25 percent of all entrepreneurs only started their online business during the pandemic. They were perhaps driven to start a business out of necessity. …….