Report Explores the Emergence of Smart Farming Solutions in LMICs and Identifies Opportunities to Scale These Solutions

From working a wide range of project such as growing matoke in Uganda, storing apples in Uzbekistan or exporting rice out of Cambodia, I appreciate how innovative technology solutions can help small farmers and businesses in the agriculture sector. Therefore, it was with great interest to read a report published by the GSMA, a UK-based organization that represents the interests of mobile operators worldwide, which presents findings from an assessment of smart farming solutions for smallholders in low- and middle-income countries (LMICs).

With research performed by a team from the Digital Agri Hub, which strives to build a sustainable digital agriculture (D4Ag) landscape towards agriculture transformation LMICs, the assessment examined more than 70 smart farming solutions being implemented in LMICs around the world. The solutions cover three sub-use cases including smart crop management, smart livestock management, and mechanization.

Image of smart farming sub-use cases: GSMA

The Digital Agri Hub team focused their research on answering the following questions:

1. What are the leading smart farming solutions available in LMICs?
2. What smallholder challenges do these smart farming solutions address?
3. What are the enabling factors and challenges impacting the growth of technology-enabled smart farming solutions?
4. What use cases do the various smart farming solutions support and how do they contribute to climate and disaster resilience, inclusivity and increased productivity and well-being?
5. What operational and business models for smart farming are emerging and how can smart farming solutions achieve scale?
6. What technologies are supporting the implementation of smart farming solutions?
7. How are investors perceiving the smart farming opportunity?

In the data collected from researching the aforementioned questions, six key trends were identified:

1. Smart farming solutions have had a strong focus on high-end, capital-intensive crops like horticulture, aquaculture and livestock, in contrast to other digital agriculture solutions where there is a stronger focus on cash crops.
2. Smart farming services require a robust technical background and strong digital services know-how. As a result, there are fewer traditional digital agriculture service players (such as mobile operators, NGOs and governments) playing a leading role in the roll-out of smart farming solutions.
3. Although achieving scale has been elusive for most smart farming solution providers to date, aquaculture management service solution providers have enjoyed some early successes in expanding their user numbers and attracting funding from investors.
4. Smart farming solution providers focused on smallholder farmers are pivoting away from pitching the technology itself (smart sensors, smart greenhouses, smart irrigation systems, etc.) to pitching platforms and solutions that solve specific smallholder problems.
5. Smart farming solutions are often bundled with e-commerce platforms that connect farmers to input suppliers, traders and buyers to help them find markets for their increased yields.
6. Smart farming solutions have struggled to make inroads with female farmers given the nascent stage of most smart farming companies. In the early stages, D4Ag providers have focused on scale without necessarily taking a gender lens approach.

Researchers also identified six main business models being implemented by smart farming solution providers in LMICs: upfront purchase or asset transfer, pay-as-you-go (PAYG), smart farming-as-a-service/subscription, freemium or tiered, service bundling, and data or insights monetization. The report points out that "These are not mutually exclusive as D4Ag providers may rely on different models to target different customer segments. For example, a D4Ag provider may rely on upfront purchases for their business-to-business (B2B) channel but on pay-as-you-go (PAYG) for their business-to-consumer (B2C) channel."

What is more, "To date, the smart farming services that have had the most success achieving scale are those that rely on the PAYG or smart farming-as-a-service models. These business models lower the barrier to entry for smallholder farmers while creating an ongoing relationship that allows the D4Ag provider to maintain control of the farmer relationship and upsell new services over time."

I appreciate the report's assertion that "Given the nascent stage of the smart farming opportunity in LMICs, investors, donors and other industry stakeholders will need to take several steps before deciding to invest in a smart farming venture." Research from the Digital Agri Hub "has resulted in the following recommendations for ecosystem players seeking to invest in smart farming solutions in LMICs:"

1. Prioritize higher-margin value chains for market entry, such as fresh produce, aquaculture and livestock. These value chains give smallholder farmers slightly more room to invest in new technologies than cash crops, which tend to have very low margins and prices are beyond their control.
2. Consider the characteristics of a country before deciding on market entry. Pay particular attention to the regulatory environment, available network infrastructure, the competitive environment and the maturity of the targeted value chains.
3. Prioritize the right partnerships. Smart farming solutions tend to be more complex than other digital agriculture solutions and, therefore, often require the participation of other ecosystem players. Look to other D4Ag providers to enhance the service offering, to agribusinesses and cooperatives to help aggregate demand, to financial service providers (FSPs) to facilitate financing or identify new target segments (for the monetization of data), to mobile network operators (MNOs) for network access and client relationships and to asset or hardware manufacturers to help reduce the cost of the hardware by creating scale.
4. Take a long view. Patient capital from early investors will make it easier for D4Ag providers with smart farming solutions to attract additional investors and scale their business. D4Ag players will need to spend time educating investors about the potential of smart farming solutions.
5. Ensure farmers are involved in the design of smart farming solutions. Solutions must solve challenges that smallholder farmers face in their daily lives, not those that governments, investors or other stakeholders perceive they face.
6. Understand the total cost of the solution being offered and how that compares with a smallholder farmer’s ability to pay for the solution. This includes understanding the full cost of implementing the technology (e.g. setting up the sensors, installing gateways, etc.) as well as the ongoing support (e.g. access to the platform, data connectivity, etc.).
7. Offer more than just data. It is critical, particularly in the context of smallholder farming, that D4Ag solution providers offer more than just the data generated from their smart farming technology. They must translate that data into specific recommendations and, eventually, automated actions. They must also endeavor to offer holistic solutions that help farmers solve a multitude of challenges, not just one specific challenge.

The report correctly notes that "Smart farming solutions can power the transformation of the agriculture sector and assist in the professionalization of smallholder farming by automating decision-making at the farm level." Moreover, "They can help smallholder farmers in LMICs increase their productivity and disaster resilience by opening access to assets and mechanization, optimizing the use of inputs, labor and natural resources and reducing crop and animal losses and waste."

This assessment of the smart farming opportunity in LMICs is the first in a series of reports produced for the Digital Agri Hub that highlight innovations supporting climate and disaster resilience, inclusivity and increased productivity and well-being. I appreciate how the report explores the emergence of smart farming solutions in LMICs and identifies opportunities to scale these solutions. The report also serves as a valuable took in providing supply-side solution providers, such as agritech innovators and mobile operators, as well as the investors and donors that support them, with insights into the smart farming opportunity in LMICs.

What are your recommendations for improving smart farming solutions to help smallholder farmers access assets and mechanization, increase labor efficiency, improve productivity and resilience to climate change, promote the inclusion of groups typically left behind (including women and youth), increase incomes and facilitate smallholder access to credit and insurance products?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

EIU's 'China Emerging City Rankings' Aims to Uncover Opportunities Amid Uncertainty

As a strategic advisor to business executives, I am often asked which cities in China provide the best opportunities for corporate expansion. To provide an informed opinion, I utilize information provided by the Economist Intelligence Unit (EIU) such as the EIU's China Emerging City Rankings, which identifies urban centers with the greatest growth potential and includes parameters that will guide development and influence companies' long-term strategies.

Most people familiar with the China market events will concur with the EIU's 2022 version of its China Emerging City Rankings that "Chinese cities have faced extraordinary challenges and mounting uncertainty since late 2021." The report adds: "The debt crisis facing China's domestic property developers has fueled concerns over the health of not only local property markets, but also the fiscal position of local governments. A nationwide energy crisis has also forced authorities to strike a delicate balance between achieving carbon neutrality and sustaining economic growth. The spread of the highly-contagious Omicron variant of covid-19 has tested the efficacy of China's 'dynamic zero-covid' doctrine, as prolonged lockdowns across dozens of cities inflict massive shocks to local economic growth."

Aiming to address which cities have the greatest growth potential in the overall ranking, which cities can best navigate China's property woes, and which cities have higher economic resilience to covid-19 outbreaks, the report's key findings include:

• The urban centers with strong growth potential are dominated by cities in eastern China, in addition to two inland cities, namely Hefei and Chengdu. The EIU see these regions as best placed to attain sustainable growth amidst economic uncertainty.
• Thanks to the strong presence of high-value manufacturing or service sectors, cities in the Greater Bay Area (GBA) and Yangtze River Delta (YRD) will continue to enjoy steady population inflows and relatively healthy fiscal structures. This will help them navigate the fallout of China's property sector troubles.
• The effects of citywide lockdowns that shocked China's economy in April-June 2022 are largely excluded from the EIU's emerging city index. Nevertheless, the UK-based organization created an index to assess a city's economic resilience in the face of covid-19, which finds that small population size and low density contributes positively.

Diving deeper into which cities have the greatest growth potential in the EIU's overall ranking, Hangzhou (Zhejiang) topped the emerging city rankings in 2022 following by other large cities on China's east coast (see map below). "With strong population inflows and industrial bases," the EIU explains that "these cities will play important roles in national strategies to move China up along global value chains, including via processes that include technological upgrading and a (longer-term) emphasis on decarbonization. In addition to coastal cities, some provincial capitals also feature within our top 10 ranking, such as Hefei (Anhui) and Chengdu (Sichuan). These outcomes reflect the success of these cities in developing their 'strategic emerging industries,' which have become increasingly important drivers of future industrial growth."

Regarding China's property woes, the EIU points out that "The debt crisis facing China's domestic property developers, has fueled concerns over the health of not only local property developers and banks, but also the fiscal position of local governments. These events have caused property prices across Chinese cities to plunge in recent months. This combined with the broader pandemic-induced economic slowdown have also prompted local mortgage boycotts, exacerbating property sector strains."

As for which cities can best navigate China's property woes, "Recent growth patterns in average land transaction prices, which could foreshadow housing price trends in the near future, illustrate that Hangzhou (Zhejiang) and Guangzhou (Guangdong) stand out in attracting population inflows–should sustain future local property values, even as authorities clamp down on speculative behavior."

For those businesses operating in China, the EIU's report serves as a useful tool for uncovering opportunities amid uncertainty.

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Asia Predicted to Be the Fastest-Growing Region for Electricity Consumption During the Next Decade

According to a report published by the Economist Intelligence Unit (EIU), "Asia's energy transition and decarbonization strategies are determined by two factors: Asia is forecast to be the region with the fastest growth in electricity consumption over our ten-year forecast period (2022-31); and it is the most reliant region on coal for its power generation." What is more, "The combination of these two factors makes it challenging for governments to decarbonize their power sector while satisfying increasing demand for electricity, and without compromising energy security."

The EIU's report further explains that "[t]his dilemma explains why, despite being the world's biggest market for renewable energy investment, Asia's dependency on coal is far from waning." In fact countries such as "China, India and Indonesia, among other countries in the region, are still approving and building new coal-fired power plants. Furthermore, governments' bets on coal have only increased since Russia invaded Ukraine earlier this year, intensifying an already acute global crunch in gas supplies."

However, the EIU expects "renewables to increase their share in power generation over the next ten years. In China, the share of energy from non-hydro renewables in total generated electricity will rise from 15% currently to about 26% in 2031, while in India this share will grow from 11% to 21%. In Japan and South Korea, renewables will also grow strongly, from 15% to 23% and from 7.5% to 19.5% respectively."

Below are the report's key findings:

• The global energy crisis has forced Asian governments to balance the need for energy security against the need to minimize climate change. This will undermine progress at the COP-27 climate talks in November.
• Asia will be the fastest-growing region for electricity consumption over EIU's ten-year forecast period, but is also the region that relies most heavily on coal for its power generation. Decarbonization will be a major challenge.
• Asia will continue to be the world's biggest market for renewable energy investment, with the lion’s share going to China, India, Japan and South Korea. Solar energy will get more capacity additions until 2031, when wind power capacity will accelerate.
• Many governments in the region are now looking at nuclear energy as a way to become less reliant on imported energy, but it will not help with the short-term energy crunch.
• Given these dynamics, developed countries will be under pressure to ramp up financing for Asia's energy transition at COP27, despite the weakness of the global economy.

"The varying economic and climatic fundamentals of Asian countries will govern the positions that they take on key issues at the upcoming COP27, the UN climate change conference to be held in Egypt in November 2022," the EIU notes. "Although most major Asian countries have submitted net-zero pledges, their Nationally Determined Contributions (NDCs) still lack detailed plans on how they intend to reach their emission-reduction targets."

The UK-based organization concludes its report with the following:

The negotiations at the COP27 are likely to be contentious, and it is difficult to foresee any significant progress. Owing to a volatile economic and geopolitical environment, developing Asian countries such as India and Indonesia will find it ever more difficult to secure meaningful commitments from the developed world to finance their energy transition. The lack of sufficient mitigation finance, a monetary tightening cycle in major Western economies and high material costs for renewable projects will make energy transition costlier. This will result in countries showing greater resistance to wean themselves off dirty fuels such as coal, and could weaken the climate policy stance taken by developing Asia at the conference. Furthermore, recent extreme weather events in Europe and the US are likely to shift domestic public sentiment in those countries towards channeling climate adaptation funds towards domestic needs before committing to assist other countries. This will be detrimental to negotiations on providing financial support for adaptation to climate change, which is a major cause for concern for many developing Asian countries.

This report provides a good summary on the trajectory of Asia's energy mix over the EIU's ten-year forecast period. What are the implications of Asia being the fastest-growing region for electricity consumption during the next decade? How do you think the region will overcome challenges of decarbonization to meet the increasing demand for electricity?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Report Evaluates Gaps in Early Warning Systems for Climate-Related Hazards in the US

"As climate-related weather events become a greater risk across the globe and in the United States," a report produced by the GSM Association (GSMA) explains that "innovative and inclusive early warning systems (EWS) are critical to mitigate these risks and strengthen preparedness for climate disasters." Moreover, "The frequency and impact of climate-related events have escalated in the US in recent years, negatively impacting communities and resulting in loss of life, property and livelihoods."

Funded by the UK's Foreign, Commonwealth and Development Office, GSMA's report evaluates the gaps in EWS for climate-related hazards in the US, and identifies examples of mobile and digital interventions used at the community level in low- and middle-income countries (LMICs) that could help underserved and vulnerable groups become more resilient to climate-related disasters. The report also provides specific recommendations for closing identified gaps to strengthen EWS in the US.

The report's key findings include:

• Climate-related hazards are on the rise in the US
• Socially vulnerable groups are the most affected by climate-related risks and disasters
• Early warning systems at the community level are not as robust as national systems
• There are opportunities to improve how emergency warnings are issued and disseminated
• Innovative community-based EWS in low- and middle-income countries offer lessons for the US

The GSMA proposes the following recommendations to help develop inclusive climate resilience strategies:

Co-design EWS with communities to strengthen communication, dissemination and response capability. "The current approach in the US aims to do this, but is often poorly implemented. Bringing American community organizations and municipalities together to develop new and/or modified EWS delivery models for Integrated Public Alert and Warning System (IPAWS) message initiation, or transfer to another system, will help develop localized models and strengthen community trust."

Investigate opportunities to leverage multi-channel EWS communication to reach a wider group of users and improve users' responses to messages. "In the US, message recipients are more likely to act if they receive a warning multiple times from different platforms. Message solutions like CHANTER could be used in combination with existing systems to amplify messages and make them more relevant, resulting in more specific messages being delivered to recipients' phones. When local communities are stakeholders and involved in managing such solutions, messages sent through the community-based channel would most likely be considered trustworthy and, therefore, prioritized."

Strengthen multi-language EWS messaging. "Leverage low-cost systems to rebroadcast messages in multiple languages. Local governments may also use other systems to auto-translate messaging for minority languages in coordination with user representatives from these communities. There is also an opportunity to pilot AI-powered auto-translate systems, for example, talking books to reach users who are not literate."

Engage partners in educating customers about wireless emergency alert (WEA) and local opt-in alert and warning systems. "Local communities can partner with local wireless operators to provide information to consumers on the benefits of WEA and local opt-in systems. This could be implemented as a corporate social responsibility initiative, alongside civil society groups and county emergency offices, hosting targeted workshops and advocacy campaigns that highlight the importance of residents signing up for warning messages and gathering feedback from residents on their preferences and potential challenges related to receiving disaster warnings."

According to the National Oceanic and Atmospheric Administration's National Centers for Environmental Information, there were 142 weather- and climate-related disasters costing at least $1 billion each have been recorded in the US in the past 10 years. The most common and costly events were hurricanes, cyclones, and wildfires. The estimated cumulative cost of these events between 2012 and 2022 was more than $1 trillion.

The GSMA importantly notes that "Planning for climate change requires that government institutions and local communities adapt and prepare systems and strategies to mitigate the risks of climate-related disasters and build their resilience and capacity to respond." This report presents some valuable insights into how to create innovative and inclusive climate resilience strategies by closing gaps to strengthen early warning systems in the US.

Do you agree with the report's recommendations?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Report Explores the Looming Energy Supply Crunch on Europe's Economy

The Economist Intelligence Unit (EIU) provides a stark warning: "Europe is heading for an energy supply crunch this winter. Russia's weaponization of gas deliveries will result in energy shortages, high prices and an economic downturn."

In its report, the EIU points out that "Since its invasion of Ukraine in February 2022, Russia's aim has been to make gas supply to Europe as unpredictable as possible and thus undermine economic confidence and EU resolve on sanctions." What is more, the UK-based organization assumes "that Russia will not increase gas flows to Europe above the current 20% and that cuts to supply may become more severe in the coming months. Efforts to replace Russian gas with other pipelines and liquefied natural gas (LNG) have yielded some results, but cannot go much further in the short term given the limited availability of global LNG supplies and regional regasification terminals."

The report importantly notes: "On the demand side, Europe's gas needs will be suppressed both by the EU's plan to cut demand by 15% and by the impact on consumers of much higher prices. Nevertheless," the EIU expects "some countries to be unable to meet their gas needs this winter, with Germany in particular forced to implement industrial rationing.

Through this report, the EIU aims to answer the following questions:

• How will gas rationing affect the growth outlook?
• Which economies are most vulnerable to gas shortages?
• What is the outlook for the winter of 2023/24?

A cold winter and fraying European Union solidarity could make things worse, the EIU warns. "The economic damage caused by this energy crisis will vary by country. It will also depend on a number of factors that remain uncertain":

• How cold will the winter be? EU winter gas consumption since 2014 has varied between 130bn cu meters and 148bn cu meters. Currently the EU has 79bn cu meters in storage, just over two-thirds of its total capacity. More countries would face gas shortages in the event of a severe winter.
• Will EU solidarity prevail? Solidarity could break down, not only over demand reduction—a 15% voluntary reduction has been agreed, to become mandatory under certain circumstances, albeit with a long list of opt-outs and incentives—but also over gas sharing between EU member states. Gas sharing would limit the economic pain for the most exposed countries, but agreeing to domestic shortages to help a neighboring country would be unpopular.
• How extensive will substitution be? Reports are emerging of German industrial firms substituting oil or electricity for gas in their processes, or importing energy-intensive inputs from elsewhere. The extent and effectiveness of these efforts will have a significant impact on total EU gas demand this winter.
• Which sectors will be hit? EU and firm-level efforts to reduce demand will limit the amount of gas needed this winter, but the most exposed countries will still need to make difficult policy decisions to cut demand further. These could include idling industrial production and imposing price rises and even outright restrictions on household heating use.

The EIU points out that Hungary, the Czech Republic, and Slovakia are the at-most risk economies. "Central European countries will be the worst hit as they will not only face gas shortages this winter, but also suffer from the effects of gas rationing in the German industrial sector, given their integration into German supply chains," the report explains. "Hungary, the Czech Republic and Slovakia have historically relied on Russia for almost all of their gas supply needs, and do not have access to LNG terminals given their landlocked position." Furthermore, "Alternative supplies would have to come via countries that are also set to run short of gas (Germany, Italy and Austria), so supply diversification will be limited, especially if EU solidarity frays."

Recognizing that "Germany is a systemically important economy in the EU" as "it accounts for a quarter of the bloc's GDP," the EIU predicts that "a downturn prompted by gas shortages will have serious spillover effects. The industrial sector accounts for almost 30% of Germany's GDP, and reliance on Russian gas is high, at 35% (albeit down from a pre-war 55% owing to higher imports from Norway, greater LNG supplies and the restarting of coal-fired power plants)." The organization also expects "the main damage to the economy to come from energy-intensive industries such as chemicals, steel, glass and fertilizers, which will be the first to face gas rationing. However, higher prices and collapsing confidence are already affecting other sectors such as machinery and automotive manufacturing, with spillover effects being felt in Italy, Austria and central Europe."

As for France, the report says the west European country "is a wildcard: problems with corrosion as well as scheduled maintenance have taken half of the country's 56 nuclear reactors offline." Moreover, "The newly nationalized energy company, EDF, plans to reopen enough capacity to have sufficient energy for the winter, but uncertainty is high, and for now France is having to import more energy than usual, including from the UK. Should this continue, this could divert further gas supplies from their usual markets, and cause shortages even in countries that appear well supplied."

The report notes that reducing vulnerabilities in Europe's energy supply will take time.

• Short term: The EIU expects a recession in Europe this winter, with the brunt of the economic impact coming in the fourth quarter of 2022 and first quarter of 2023. An unsupportive global context—given US monetary tightening, China's growth slowdown and growing investor nervousness—will exacerbate the European downturn."
• Medium term: "Replenishing gas storage in 2023 will be difficult given that stocks are likely to be fully depleted this winter. Transitioning away from Russia as an energy source and towards LNG and renewables will take time, while a revival of coal-fired power in some countries will mean a temporary setback to emissions reduction. The winter of 2023/24 is likely to be challenging."
• Long term: "the EU's energy supply will be greener and more resilient (albeit still dependent on imported inputs for renewable technologies). High energy prices will incentivize households and firms to invest in greater energy efficiency. Russia's geopolitical leverage over the bloc will have been weakened. However, this transition will take several years and will entail considerable economic pain and political turbulence."

Whether it was during last month's trip to Granada, Spain to attend a conference featuring Spanish startups or more recent online discussions with people living in Europe, I am surprised by the general lack of concern about the looming energy supply crunch and its impact in the economy. Very few people, myself included, expected the Russian military to quickly overtake Ukraine in the former's unprovoked invasion of the latter. Now that sceptics of Ukraine's resilience have been proven wrong, Europeans must be prepared for a protracted war that may last for another two years and perhaps longer. 

One consequence of the war in Ukraine is higher energy costs in Europe. According to an article from The Economist: "For most people and businesses, the vague summertime prospect of having to pay more to keep homes warm and factories humming is about to become a harsh wintertime reality."

As another article by the EIU warns: "High energy prices would lead to a surge in bankruptcies as firms become unprofitable. Governments could also halt price protections for households, increasing heating costs further and eroding consumers' purchasing power."

What are your recommendations for how Europe can mitigate the impact of an energy supply crunch on the economy?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Returns Are a Headache for Retailers

Whether through my capacity as a strategic advisor at Koba, LLC, which owns the e-commerce platform Koba Roots, or being a long-time shareholder of Amazon.com, I have learned that returns are a significant problem online retailers face which can negatively impact their financial performance. Therefore, it was with great interest to read an article by The Economist that notes 21% of online orders in the United States, "worth some $218bn, were returned in 2021, according to the National Retail Federation, up from 18% in 2020. For clothing and shoes it can reach around 40%. It is a headache for retailers."

The article adds that online shopping in the U.S. "now makes up 15% of retail sales by value, up from 10% at the start of 2019." What is more, "only 5% of returned goods can be resold immediately by retailers. Most go to liquidators at knock-down prices or are thrown away. Retailers typically recoup about a third on a $50 item, says Optoro, a firm that helps with returns." Interestingly, "Over half of items are returned because they are the wrong size."

Some companies like Japan-based Uniqlo, or Zara, a global retailer based in Spain, are levying "a small fee for posted returns." The article point out that "Other firms, including Amazon, are selling more refurbished goods as a way to cut loses."

Online retailers are starting to use artificial intelligence (AI), virtual reality (VR), and augmented reality (AR) to simplify the ordering process for the costumer and reduce returns. According to The Economist, "Using artificial intelligence to help retailers decide what to do with the returned goods, taking into account factors such as price trends in second-hand markets is the brainchild of goTRG," a Florida-based startup which helps retailers sort returns. The article adds that Walmart, through its planned acquisition of AR startup Memoni, will let "shoppers virtually try on glasses. Walmart also offers ways to try on clothes and arrange furniture in rooms using AR. Amazon recently launched a VR feature that lets users try on shoes." The article concludes that "Retailers will now try virtually anything to cut down on returns."

In a CNBC article, Mehmet Sekip Altug, associate business professor at George Mason University, said: "In the past, retailers tended to overlook what happened after the sale. But 'as online sales increase, the return rate has also increased significantly, and I don't think it's a secondary problem anymore.'"

What are your recommendations for how retailers can reduce their return rate?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Big Tech to Remain Resilient Despite Macroeconomic Headwinds

In a report published by the Economist Intelligence Unit (EIU), "The macroeconomic environment is worsening" and the "EIU expects global economic growth to slow to 2.8% in 2022, while inflation reaches 9.2%— and big tech companies are not immune to the downturn." The report adds that Alphabet, Amazon, Apple, Meta, and Microsoft, in the quarter ended June 2022, "have reported their softest results in over a year."

According to the EIU, "The slowdown suggests that the strong growth seen as a result of the pandemic is now normalizing. Although big tech companies retain strong assets, such as their market positions, sizes and cash reserves, they will have to cope with weaker demand and higher costs over the next few years."

American enterprises with global operations that conduct commercial transactions in US dollars may be seeing a decline in sales outside of their home market as a result of a strong dollar. The EIU, however, explains that "With the exception of Meta, revenue growth is slowing, not declining, showing that big tech can still find pockets of growth despite the gloomy macroeconomic environment."

Furthermore, "Among the factors hurting big tech in 2022, the strong dollar is the most prominent one: these companies make between 40% (Amazon) and 60% (Apple) of their revenues outside the US. The impact of exchange rates was between 3-4% in the second quarter of 2022, but could reach as much as 6% in the third. We forecast that the euro will start to regain some ground in 2023, but the yen, sterling and some other currencies will remain weak."

In addition to macroeconomic conditions, especially the strong US dollar, are weighing on big tech earnings, the report's key findings include:

• Meta was the worst affected, reporting its first-ever quarterly revenue decline (-1%).
• The enterprise side remains strong, with cloud services growing at over 30%; premium services and subscriptions also remain positive on the consumer side.
• Big tech companies retain huge cash reserves (over half a trillion dollars combined), which will enable them to weather the storm
  

The EIU encouragingly notes that selling cloud services to enterprises "remain robust for big tech." The UK-based organization further says "High growth in cloud revenue suggests that businesses are sticking with their digital transformation plans despite tougher macroeconomic conditions. They view these investments as important for driving revenue and saving costs in the long term."

The report, however, points out that "The consumer environment was more difficult. As well as weaker consumer demand hitting the advertising market, online retail growth has also slowed (after surging during the pandemic years)."

On the topic of large cash reserves keeping big tech ahead, the EIU predicts that "The five companies will slow down hiring this year and next as they look to contain costs, but this follows a period of heavy hiring—Meta grew its headcount by 32% in the past year." Moreover, "Slower hiring does not suggest a lack of investment or innovation: big tech companies are increasingly competing with each other, and many other players, across a number of markets, such as healthcare, gaming or extended reality, and will continue to do so. Nevertheless, the environment is getting tougher, not only in terms of macroeconomic conditions and the competitive landscape, but also in terms of regulation."

The EIU adds that while it remains "skeptical that the US will pass any major tech laws before the November 2022 midterm elections, the EU has recently passed the Digital Markets and Digital Services Acts. Both will impact big tech companies if properly enforced." As reflected in the image to the right, the tech firms "can still use their size as well as their large cash reserves, which combine to over US$500bn for the five companies, to cope with tougher conditions."

I appreciate how this technology outlook analyzes the recent slowdown, outlines some of the critical challenges facing big tech and why, despite tricky external conditions, EIU expects these companies to remain resilient. What do you think of the report's findings? How are you making your company resilient to macroeconomic headwinds?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

A Guide to Help American Exporters Navigate Trade Finance

For many exporters in the United States, understanding the intricacies of trade finance is often a challenging undertaking. Encouragingly, the International Trade Administration (ITA), a U.S government agency whose mission is to create prosperity by strengthening the international competitiveness of U.S. industry, promoting trade and investment, and ensuring fair trade and compliance with trade laws and agreements, created The Trade Finance Guide: A Quick Reference for U.S. Exporters.

The guide defines trade finance as "a set of techniques or financial instruments used to mitigate the risks inherent in international trade to ensure payment to exporters while assuring the delivery of goods and services to importers. In other words, trade finance is a means to turn cross-border trade opportunities into real transactions by effectively managing the competing risks as well as the inherent risks facing both exporters and importers." The guide importantly adds: "The WTO estimates that trade finance plays a key role in facilitating and supporting as much as 80 to 90 percent of international trade. However, the availability of trade finance and the risk of non-payment are among the most often cited obstacles by U.S. SMEs considering selling in global markets."

The ITA says its Trade Finance Guide "explains the basics of trade finance so that U.S. companies, especially small- and medium-sized enterprises (SMEs), can evaluate appropriate financing options to help ensure they get paid for their export sales." What is more, exporters "will also find information on how digitalization is helping to transform trade finance, with the prospect of increasing access, streamlining processes, and reducing costs."

The guide is designed to help exporters answer the following questions:

1. Is your business looking to make that first export sale or expand into more markets, but needs clarity on financing options and methods?
2. Did you know that having open account terms may help win customers in competitive markets?
3. Is insisting on cash-in-advance always a good idea?
4. What are the advantages of exporting on consignment?
5. What should you know about export working capital financing or export credit insurance?

Segmented in 17 chapters including "Access to Capital for Startups in Global Markets, "Methods of Payment in International Trade," "Export Working Capital Financing and Government Guarantees," and "Export Credit Insurance," the guide provides introductions to each of the three U.S. government finance agencies (Export-Import Bank of the United States' Office of Small Business; U.S. Small Business Administration's Office of International Trade; and U.S. Department of Agriculture's Foreign Agricultural Service's Credit Programs Division) in their respective chapters and have updated other chapters, as appropriate, in collaboration with experts from relevant fields. The ITA will be continuously updating the online Trade Finance Guide on an as-needed basis, with a revised PDF version available for download on an annual basis.

While myriad of opportunities exist for U.S. exporters, they also face major types of risks including:

• Country risk is the risk of exposure to financial loss caused by political, economic, and social conditions and events in a foreign country.
• Commercial risk is the risk of non- and delayed payment caused by the importer’s insolvency or cash-flow problems.
• Foreign exchange risk is the risk of exposure to financial loss due to the fluctuation of an exchange rate change when trading with countries that have a different currency.
• Cultural influences are an additional risk factor that can negatively affect all aspects of international business.

And as an advisor to many American exporters, I appreciate the following tips for exporters:

• Be mindful of emerging trends that could reduce the complexity, cost, and processing time of trade finance transactions.
• Inquire with your current trade finance provider about available or planned digital options that could enhance efficiency and reduce costs.
• Explore trade finance options, including consulting new fintech-based trade finance providers about both traditional instruments and innovative offerings.
• Be cautious of potential fraud and cyber security risks that may accompany new technologies and online trade finance platforms.

In presenting the benefits of exporting, the guide notes:

The United States is the world's second largest exporter, with $2.5 trillion in goods and services exports in 2021, according to the U.S. Census Bureau and the U.S. Bureau of Economic Analysis. However, less than one percent of America's 32 million companies export; and of those do, about 60 percent sell to just one or two markets—Canada and Mexico, for example. And SMEs, which account for 98 percent of the nearly 280,000 American exporters, are even less likely to export to more than one market. With 95 percent of the world's consumers living outside of the United States, beginning to export-- or expanding to additional export markets—can help SMEs expand their sales, diversify their portfolios, and insulate them against periods of slower growth in the domestic economy.

What tips do you have on financing new export sales?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Report Explores a New Era for Digital Payments

Following a white paper, Going digital: payments in the post-Covid world, The Economist Intelligence Unit (The EIU) published in 2021, which showed how digital channels were replacing traditional modes of payments across the world amid greater uptake of mobile wallets and other forms of digital payments, The EIU recently developed a new dataset, along with five-year forecasts, confirming these trends. Entitled Beyond borders: a new era for digital payments, this white paper offers an overview of The EIU's forecasts for digital payments, as well as the accompanying stagnation of automated teller machine (ATM) numbers and the mixed outlook for card payments. It also looks at the new frontier for disruption: cross-border payments.

Below are the paper's key forecasts:

• Following a surge during the pandemic, when lockdowns forced consumers online, growth in digital payments will soften during our five-year forecast period (2022-26).
• The number of ATMs will stagnate or decline, while debit and credit cards will struggle to maintain market share as mobile payment platforms gain more traction.
• While digital disruption to domestic payments continues, the ongoing Russia-Ukraine war will cause parallel disruption to cross-border payment systems and potentially challenge the dominance of SWIFT.
• Countries will seek to interlink their national fast-payments systems, reducing intermediaries and bringing down the cost of sending money abroad.
• Countries across Southeast Asia are in the process of interlinking their fast-payments systems to allow travelers across the region to purchase goods and services by scanning quick-response (QR) codes.

The report also points that APIs, tokenization and blockchain will together become the new normal. "As well as challenging SWIFT, disrupting cross-border payments will mean adopting innovative solutions and emerging technologies, including blockchain, APIs and tokenization."

• APIs have been a game-changer for retail payments, providing end-to-end tracking of payments and confirmation of transactions to all parties involved. They enable interaction across the digital marketplace, higher levels of transparency, and a seamless experience for both customers and merchants.
• Tokenization, which creates a unique code for every single transaction conducted through an API, and blockchain technology, have also emerged as a major way to ensure security, improve efficiency and raise the transparency of payments.
• Blockchain technology employs encrypted distributed ledgers that eliminate the need for any intermediaries but still provide verification of transactions in real time.
• As with domestic payments, real-time payments will also become a cornerstone for the acceleration of cross-border payments.

With respect to governments encouraging development of cross-border payments linkages, The EIU expects "increasing involvement from government entities to facilitate the development of the fintech sector, promote financial inclusion or aid the flow of remittances from overseas workers." The paper further says "Singapore (with PayNow) and Thailand (PromptPay) were the first countries to interlink their fast-payments systems in April 2021. More countries, especially in Asia, have since unveiled plans for similar tie-ups." Importantly, "This process will also be facilitated by the development of central bank digital currencies. These digital currencies aim to provide efficient and inclusive payments services—which traditional systems have failed to provide—and also emerge as trustworthy alternatives to private projects such as stablecoins, cryptocurrencies that (in theory) peg their value to another currency or commodity."

At the same time, the paper notes that "countries like Russia, China and India could encourage international trade denominated in their own currencies, or enter into bilateral trade agreements—between the rupee and ruble, for instance—to avoid settlements in dollars or euros." What is more, "Although the US dollar’s dominance of international trade will remain unchallenged in the short and medium term, emerging powers in Asia will try to reduce the greenback’s influence to avoid runs on their foreign-exchange reserves and mitigate the impact of any future disruptions."

The report provides a thorough explanation on how digital channels are replacing traditional modes of domestic payment around the world amid greater uptake of digital wallets and other forms of mobile transactions. Moreover, businesses of all sizes will find value in The EIU's latest forecasts for domestic payment flows and the deep-dive into the future of cross-border transactions.

How is your business taking advantage of the digital disruption of cross-border payments?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

GSMA Report Says 5G Coverage Will Accelerate Across Asia Pacific Supporting Advancements in Next-Generation Services

"At the end of 2021, the number of mobile internet users in Asia Pacific exceeded 1.2 billion, reflecting a penetration rate of just under 45% of the population," the GSMA notes in its annual report on the state of mobile economy in the Asia Pacific region. "This means that more than half of the population live in areas covered by a mobile broadband network but do not yet subscribe to a mobile internet service (usage gap)."

The UK-based organization, which represents the interests of mobile operators worldwide, adds that "The main reasons for the usage gap include the lack of digital skills (especially among older populations), lack of affordability among low-income households and online safety concerns among minority and vulnerable population groups. Addressing the usage gap for these key groups will extend the benefits of the internet and digital technology to more people in society. This requires concerted efforts by a broad range of stakeholders working together with mobile operators and other ecosystem players, such as device manufacturers and digital content creators."

The report's other key findings include:

• 96 percent of the population of Asia Pacific are covered by mobile broadband networks
• By 2025 there will be 400 million 5G connections across the region – just over 14 percent of the population
• $770 billion of economic value added by the mobile industry in 2021, approximately five percent of the GDP in the region
• Security and sustainability move up the agenda for operators
• Policymakers and regulators can fuel growth and innovation by finding the proper balance in the regulatory environment to support mobile network deployment and operations.

In addition to providing significant economic value to the region's economy, "The mobile industry continues to deliver social impact across Asia Pacific, primarily by providing the connectivity that enables the growth of small businesses and digital transformation of enterprises, and granting access to life-enhancing services and tools for citizens," the report explains. "Mobile money is one example, with adoption scaling rapidly in parts of Asia Pacific as operators support the region’s shift to digital payments."

The report also mentions that "The metaverse ecosystem is growing in many countries around the world, including in Asia Pacific. This is demonstrated by the interest of public agencies and private enterprises in establishing a presence in the metaverse and actively utilizing the platform in their engagement with customers and other stakeholders." For example, "South Korea plans to spend at least $186.7 million to create its metaverse ecosystem, as part of the country's Digital New Deal."

As highlighted in the image on right, the GSMA highlights how "Other governments in the Asia Pacific region, both at national and provincial levels, have outlined plans to harness the potential of the metaverse to increase the efficiency and quality of public services, as well as improve collaboration between local and national government agencies. This will be crucial to the development of the broader metaverse ecosystem, including for content creators and telecoms operators."

On the topic of security and sustainability, the report points out that "Security is the top priority for network transformation strategies among operators in Asia Pacific. This is not surprising given the backdrop of rising security threats to telecoms networks and, increasingly, to end users." Using Thailand as an example, the GSMA says 56 percent "of cyber threats in 2021 reportedly occurred via vulnerabilities in mobile devices."

The report also notes that "Operators across the region are also accelerating the shift to more sustainable operations, given the demand for a greater focus on energy efficiency from key stakeholders, including shareholders and customers. The industry is addressing the challenge through a comprehensive set of actions, such as the use of solar and improving the energy efficiency of networks.

As for creating policies to facilitate digital innovation, the GSMA asserts that "As society now moves towards a 'new normal' post pandemic, mobile connectivity will be central to the development of new and innovative technological solutions to today's problems. As 5G network deployments continue, 5G's ability to support next-generation offerings (such as cloud services, AI, IoT and edge computing) will drive digital economic growth and innovation."

Moreover, I support GSMA's assertion that "Policymakers and regulators can fuel growth and innovation by finding the proper balance in the regulatory environment to support mobile network deployment and operations." The organization says policymakers should also take steps to:

• establish a forward-looking regulatory regime that supports the financial sustainability of the industry and provides non-discriminatory conditions to drive new innovations from large companies and SMEs
• adopt policies that enable the building and deployment of infrastructure to support future networks accessible to all
• create and maintain a safe and trustworthy online environment to protect users from threats
• ensure that available spectrum serves the future demand for connectivity.

"These steps have the potential to set the proper foundation to support future economic growth, societal development and technological innovation."

Infographic: GSMA

Despite some near-term geopolitical and socioeconomic risks, I remain bullish about Asia Pacific's mobile economy. How are you positioning your business to capitalize on the region's growing mobile market?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.