Introduction of Digital Economy
The term "digital economy" refers to all online economic activity. The phrase "Internet Economy" or "Web Economy" is frequently used to describe it. Digital and conventional economies are coming together as a result of the development of technology and the process of globalization. Let's find out more about the idea of the digital economy.
What is the Digital Economy?
An economy focused on digital technology or one built on digital and computing technologies is referred to as a "digital economy." It includes all commercial, economic, social, cultural, etc. activities that rely on the internet and other forms of digital communication.
The three primary parts of this economy are as follows:
- Web-based business systems
The term "digital economy" describes an economic activity that employs digital technologies and electronic communication to offer goods and services. The fundamental elements of the digital economy include :
- The Internet:Due to this, businesses may sell their products, and customers can browse for anything they need.
- E-mail: Electronic communication makes it possible to communicate instantly and cheaply around the globe. Requests and information can be sent very fast using this method.
Electronic automation Computer processing power can be used by businesses to decide on output, pricing, and consumer outreach strategies.
- Digital payments: include bank transfers, bitcoin, credit cards, Apple Pay, and Google Pay. We are heading toward a cashless society thanks to the internet economy.
- Automation: The digital economy increasingly depends on AI, widespread electronic data utilization, automated technology, and social media.
- Social media is, to a lesser extent, a component of the digital economy. People who use it recommend businesses to one another.
We have witnessed the enormous development of digital platforms and their impact on our lives over the past decade. Consumers today are impacted by what they see on social media platforms like Facebook, Twitter, and Instagram, as well as other widely used websites (youtube, etc).
The traditional economy is composed of actual stores, tangible products, and cash transactions. The traditional economy has gradually incorporated elements of the digital economy, such as traditional businesses accepting debit cards before conducting online sales.
Some businesses missed the opportunity to sell directly from an e-commerce site and deliver their products to customers as the digital economy developed. Some digital services no longer offer tangible products. For instance, Netflix and Spotify don't require any physical items to function because everything is broadcast over the internet.
The Digital Economy in Action
Tourists can make online reservations thanks to Airbnb. Additionally, it has made it easy for private homes to rent out a room or a house to tourists. It was not feasible before the advent of the digital economy
- eBay or Amazon Market.
- With Netflix, users can rent and buy movies and TV shows over the internet without exchanging any actual goods.
- A website that sells electronic books for economics revision, such as Economics Help.
So this economy is a method to take advantage of this chance. Today, it is incorporated into every facet of a user's life, including banking, entertainment, healthcare, and education.
Advantages of the digital economy -
- Encourages Internet Use
If you stop to think about it, the majority of your daily tasks may now be completed online. The internet, which started in the USA and has experienced tremendous expansion, is now a global network.
As a result, investments in everything related—hardware, technological research, software, services, digital communication, etc.—have dramatically increased. Because of this, the internet and web-based enterprises are guaranteed to be around for the foreseeable future.
- Growth of E-Commerce
Businesses that embraced online commerce in the past ten years and adapted to the internet have prospered. The e-commerce industry has gone into overdrive as a result of the digital economy. Purchasing, distribution, marketing, creation, and selling have all evolved beyond merely direct selling.
- Products and Services Offered Online
The days of music CDs and movie DVDs are long gone. These products are now accessible to us digitally. There is no longer any demand for any physical goods. This also applies to services like banking and insurance. If you can complete all of your transactions online, there is no need to go to the bank. In this digital economy, some products and services have been fully digitalized.
The vast majority of transactions and payments occur online in the digital economy. Cash transactions are getting less common. This increases economic transparency and helps lessen illicit money and market corruption. In order to advance the digital economy, the government actually pushed for online transactions during the demonetization process.
- Additional Information
Consumers now have access to more information and options because of the internet. For instance, it facilitates price comparisons between businesses. Additionally, it puts knowledge at one's fingertips. This is crucial for travelers who are on vacation. Finding hotel rates and transport schedules may not have been possible before the advent of the internet economy.
- Saves Time
Before, you had to travel into town to get office materials if you wanted them. Today, you may place an order online, and it will be delivered the next day. This reduces labor costs for businesses.
- Decreased Costs
By conducting the majority of their business online, businesses can save on the high cost of facility rentals. The ability to transmit personalised goods directly from a factory or warehouse to customers, bypassing retailers, is made possible by the digital economy. Because of this, prices and costs can be reduced.
More customization is available in the digital economy than in the traditional economy. A typical store, for instance, would only have space for a specific number of colours and sizes, but in the digital economy, a customer can select any preference, and the product can then be custom-built, such as a 3D printer. For instance, specially made clothing in specific sizes and colours to suit individual tastes
- Lower Entrance Barriers
Aspects of the digital economy make it simpler for new businesses to enter some markets. A businessperson can develop a new product that competes with established companies if they have an original idea that is adopted. Numerous previously unthinkable services have been made possible by the digital economy, from dating applications to online grocery deliveries.
- Generates important data that can lead to fresh discoveries
Governments and nonprofit organisations can benefit from the large generation of data by learning more about the state of the economy. For instance, using a smartphone app to track the spread of COVID-19 may show the locations of emerging local hotspots.
Disadvantages with the digital economy -
- Monopoly Authority
Despite the possibility of new start-ups, monopoly-holding companies have come to dominate many facets of the digital economy. For instance, Amazon has a monopoly on online sales, which forces many businesses to use the Amazon market place to connect with customers who regularly shop there.
The brand loyalty and market dominance of Google and Facebook are also extremely strong in their respective markets. Due of this, a few tech behemoths are now tremendously profitable. Google is able to charge high costs for internet advertising thanks to its dominant position, while Amazon has the market power to undercut other traditional book retailers.
- Less Community
A physical bookstore can serve as a hub for the neighbourhood. It might host occasions and book signings, and people might enjoy the experience of looking through actual books. Old-fashioned booksellers are put out of business when the digital alternative undercuts established businesses.
Despite the fact that books may be less expensive, we no longer have the physical interaction between vendors and customers, which was a crucial part of the purchasing process.
- Technology's addictive qualities
Although finding bus schedules online is considerably easier than on paper, this potential time savings may be overshadowed by the time we squander monitoring Facebook, Twitter, and internet searches.
Additionally, the sheer amount of information might make us feel overwhelmed and cause us to lose sight of what we actually need. There is no guarantee that more options will produce better results. We can take our time making decisions and it gets simpler to put things off when we are presented with a dizzying array of possibilities.
- More graphic content has emerged due to Social Media
Social media's distance and anonymity have made it more popular for people to make personal attacks, propagate conspiracies, and share pornographic or violent imagery. Content that is harmful to human well-being is proliferating thanks to the digital economy.
- Privacy Problems
Data collection and use are now very profitable industries. Facebook gathers a wide variety of user data, and political interests have purchased this data so they may target individuals with highly relevant political adverts.
- Employment Loss
Our reliance on human resources decreases as our reliance on technology increases. The development of the digital economy could result in significant employment losses. The need for human resources declines as procedures become more automated. Consider internet banking as an example.
- Lack of knowledge
Complex technology and processes are needed in the digital economy. The platforms need to be built and maintained by specialists and educated people. Particularly in rural and semi-rural areas, these are few.
- Significant Investment
A robust infrastructure, an efficient Internet, and robust mobile networks are necessary for the digital economy. This entire process takes a lot of time and money. Infrastructure and network development in a developing nation like ours is a very slow, time-consuming, and expensive process.
To Sum Up:
Businesses in the conventional economy sell customers tangible goods. Businesses can sell both physical and digital goods in the digital economy. Additionally, they have changed the means through which they offer these goods. Businesses would sell their goods through physical stores in the conventional economy. Businesses can use e-commerce platforms to sell their goods online in the digital economy.
In the digital economy, even the method of payment has changed. Businesses would accept cash as a form of payment in the conventional economy. Businesses can accept a variety of payment methods in the digital economy, including credit cards, debit cards, eWallets, and mobile payments.