Service sector firms earning more through e-commerce

However, MTI report finds retail trade and business services are lagging behind other segments

Singapore firms in the service sector are generating more revenue through e-commerce but the trend varies widely with some segments like retail still lagging behind others, a new survey noted yesterday.

It found that total e-commerce turnover for these businesses stood at $237 billion in 2018 - about 6.5 per cent of the total operating receipts earned, and just ahead of the 6.3 per cent share in 2016.

E-commerce revenue grew by 20 per cent on a compound annual growth rate from 2016 to 2018, faster than the 18 per cent growth rate recorded by non e-commerce business operations in the same period.

But not all segments of the service sector are adopting e-commerce solutions, noted the report from the Ministry of Trade and Industry (MTI).

Segments like information and communications, accommodation and transport and storage recorded higher e-commerce penetration.

This is thanks to growing online consumer activities such as making hotel and flight bookings digitally.

But retail trade and business services, which include real estate and management consultancy, fell behind the pack.

MTI economists and experts from the Department of Statistics said in the report: "While most of the industries in the services sector have seen an increase in e-commerce adoption, there is scope for firms across all industries to do more."

Nanyang Polytechnic school of business management director Esther Ho said: "A major obstacle that small and medium-sized enterprises (SMEs) face is the lack of digital know-how to develop an online presence. The simplest of tasks, from taking pictures of products to uploading the product on the online platform, comes easy to the new generation of digital natives but is an alien practice for the older generation.

"Sustaining an online presence is equally challenging. After an e-commerce website has been successfully developed, the retailer has to constantly introduce new products and create new promotions to excite the customers to visit. This takes time and resources which the retailer can ill afford if he needs to run a physical store."

OCBC Bank's head of treasury research and strategy Selena Ling added: "Smaller retail firms especially SMEs... may hesitate over the cost, lack the know-how and manpower, or face global competition."

  • 20%

    Growth of e-commerce revenue on a compound annual growth rate from 2016 to 2018, faster than the 18 per cent growth rate recorded by non e-commerce business operations in the same period.

The report noted the benefits that e-commerce brings.

It allows firms to transcend geographical barriers and reach a wider market, including overseas, while reducing barriers to entry for new firms as they can save on costs such as rent.

Adopting e-commerce can also help firms to reduce the manpower they need, as processes such as billing or inventory processing get automated. This also leads to increased productivity, the report said.

The coronavirus outbreak could be a spur to greater adoption and push companies to take the chance to go online as consumers avoid crowded areas and turn to e-commerce.

Ms Ho said: "Physical store sales will be the most impacted in light of the Covid-19 situation. This may provide impetus for retailers to seriously consider (going) online, especially if there are successful stories to share."

The report added that the Government will help firms in their transformation efforts through initiatives like the SMEs Go Digital programme, which supports businesses in building technological capabilities.