From a short-term perspective, the COVID-19 pandemic may appear to have derailed the continued development of the digital economy.
However, the longer-term perspective is one of demographic shifts, reshaping the post-pandemic landscape, and low-carbon development, all of which are likely to drive innovation at a faster pace on the supply side. .
Due to the asymmetry in the development of the digital economy between production and consumption, the pandemic has had an asymmetric impact on the supply side.
In this context, the digital transformation on the supply side will be different from the centralized model of the mainstream Internet, and the deep penetration of infrastructure will create opportunities for distributed commerce.
The structure of the world’s population is slowly changing, and Generation Z (those consumers born between 1995 and 2009) have reinforced the trend of on-demand services.
According to CBNData, the world’s Generation Z, or digital economy natives, number 1.85 billion, of which 260 million are in China alone. They constitute an important part of mobile Internet users.
According to Questmobile data, in November 2020, the number of active devices belonging to Generation Z in the Chinese mobile internet space reached 325 million. They represent a new force in the digital economy and shape its future development.
Different from other age groups, the Gen Zs are “intelligent” but, in a curious apparent contradiction, “impulsive” too. This will continue to strengthen the trend of on-demand services.
On the one hand, Generation Z is focused on high-cost performance. Because they are proficient at finding information online, the habit of shopping has taken hold.
According to a McKinsey report, 50% of Gen Z consumers in China look for a discount before they buy, which is 10 percentage points higher than that of Gen Y.
According to Questmobile data, in November 2020, Gen Z penetration rate of Pinduoduo and Xianyu e-commerce platforms ranked third and fourth respectively in the mobile shopping industry, which also reflects the attitude of consumption of this enormous cohort which values ââthe practical aspect.
On the other hand, they are also prone to impulse consumption, willing to pay for interest and niche experiences. Growing up in a very prosperous internet business environment, they have cultivated various consumer preferences and are more likely to be influenced by video content on social media when making consumer decisions.
The sudden popularity of products sold in the so-called blind box segment and trendy milk tea drink brands shows the new consumer attitude of Generation Z which emphasizes following trends and keeping up with trends. display their individuality.
Being a savvy consumer and an impulse shopper might seem contradictory, but the contradiction seems more than real as it reflects Gen Z’s attitude of flexible on-demand consumption.
The vast demand for personalized differentiation is now flowing to the production side, as noted in a report titled Gen Z’s Role in Shaping the Digital Economy, released by Oxford Economics last month.
He proposes that technological advances not only directly modify the mode of production, but also the model of digital consumption that they shape. This will also indirectly affect the production side.
Therefore, in addition to using digital marketing methods such as video to reach audiences, manufacturers on the production side must also capture and perceive long-tail demand at the source in real time, and accelerate the time to scale. day of iterative products and corresponding to demand. .
The pandemic, carbon neutrality objectives and the overhaul of the offer are accelerating the digital transformation of the industry. The new landscape is also softening the rough edges of the digital economy, so that its pivot will shift from the demand side to the supply side.
First, the pandemic is having an asymmetric impact on consumption and production, which increases the efficiency of digitization on the supply side.
With the physical barrier erected during the pandemic, the digital economy is the least affected among many industries, and the imbalance in the development of the digital economy is mapped to the asymmetry of impact.
From a country perspective, the digital economy has a âdouble heartâ in China and the United States, whether in the prevention and control of pandemics or in the resumption of production; they have shown relatively resilient economic growth and their reactive measures have been more effective than those taken elsewhere.
From an industry perspective, when the pandemic broke, consumers could still use online channels to purchase basic necessities and consume online entertainment. However, the relative delay in the digital transformation of businesses has delayed the resumption of work and production in some places, which to some extent has extended the scope and impact of the new supply shock.
According to a McKinsey report, before the outbreak of the pandemic, China was already a digital leader in the consumer sector. In 2018, the Chinese e-commerce market accounted for about 45% of global e-commerce transactions.
The asymmetric impact of the pandemic has synchronized the pace of digitization on the demand side and the supply side. As businesses embark on a new development path, the industrial internet will become the long-term engine of the digital economy.
The dual carbon goal dictates new demands in industrial production, with the aim of using data and algorithms to increase the efficiency of economic activities.
The deployment of infrastructure in lower-level cities leads to distributed commerce. In the age of mobile internet, business is all about leveraging data, non-exclusivity, and the network effect to continually expand and blur enterprise boundaries.
Internet-based businesses are committed to growing their upstream and downstream businesses around their own products and creating an ecosystem with online traffic as a corporate ditch.
Although e-commerce and other types of platforms promote optimization of the distribution of social protection, from the perspective of society as a whole, Internet-based businesses often mix the functions of public infrastructure and core business models, spanning all segments from scratch, resulting in severe waste of resources due to redundancy.
This move requires not only manpower and financial resources, but also additional technology and server support. However, from a social point of view, most of the payment services provided by Internet companies are homogeneous and the repeated allocation of resources is not economical. The digital economy therefore presents an “inverted triangle” light in infrastructure but heavy in economic models.
To realize the growth potential of the Internet of Everything, it is necessary to let the fair and open “new infrastructure”, or facilities and equipment related to digital technology, take full effect.
We are also seeing lighter applications. As application technology continues to blend into the core infrastructure, with the provision of several core functions such as clearing and settlement, security, trust, and transaction confirmation for free and developed distributed commerce. low-code will have new growth opportunities and redefine the scale effect.
The infrastructure of the traditional economy is provided entirely by the public sector, represented by electricity, hydropower and natural gas. We believe that as we enter the digital age, public infrastructure will be transformed into a network of data flows.
The author is the chief economist of ICBC International Holdings Ltd.
Opinions do not necessarily reflect those of China Daily.