E-commerce challenges will overwhelm SMEs if given no support—experts

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The success of small and medium-sized enterprises (SMEs) in cross-border e-commerce is highly dependent on the amount of support the government is able to give them. This is because on their own, SMEs will likely not be able to overcome the numerous barriers to global trade, according to international experts.

The challenges SMEs face in participating in international trade are well-documented, said panelists at a recent United Nations (UN) webinar on cross-border e-commerce for SMEs. It requires that governments make enormous efforts to ensure SMEs are able to engage successfully in the global market.

The government’s role is important because 47 key barriers to SMEs’ engagement in global markets have been identified by the Organisation for Economic Co-operation and Development. While e-commerce has eased some hurdles by enabling sellers to reach a wide audience online, it hasn’t solved all the problems. Furthermore, participating in cross-border e-commerce requires competitive products and expertise which can be the new challenges for SMEs.

Tengfei Wang, economic affairs officer at the UN Economic and Social Commission for Asia and the Pacific (ESCAP), said in his talk that while e-commerce facilitates SME exportation, “navigating cross-border e-commerce can pose complexities and demands” that can lead to failure for SMEs.

Wang said the government must therefore assume a prominent role in supporting SMEs’ entry and participation in e-commerce.

Handholding SMEs throughout the whole journey is the most common success factor we have seen, he stated.

A major step some governments have taken to assist SMEs is to collaborate with e-commerce platforms and ensure these platforms provide the small enterprises with comprehensive services such as marketing, logistics, customs clearance, warehousing, distribution within the destination countries, and payment.

To illustrate, Wang described how the Rwandan government in 2018 started collaborating with a cross-border e-commerce platform, “and this partnership enabled Rwandan coffee to make its debut in China with an increasing number of coffee consumers.” 

Rwanda, classified as a least developed country, has since then seen its coffee register an astounding 700% increase in sales volume, he added.

Today, coffee production represents a vital component in Rwanda’s agricultural sector, and the country has over 290 coffee-growing cooperatives and about 400,000 farmers dedicated to coffee cultivation alone, he said.

Wang also noted how the collaboration forged by the Thai government with a cross-border e-commerce platform has led to 80,000 durians being sold to consumers in China “within a minute.”

Susana Enriquez, co-founder of Latin e-Mart Ltd in Hong Kong, in her talk added that another important area for government support is financing of SMEs.

Enriquez explained that when a company decides to export it not only needs capital to produce the products, it also needs to allocate investments in the marketing strategy, the hiring of product standards and intellectual property advisors, and digital marketing solutions.

She added that there are other costs for SMEs, such as those for joining promotional events on e-commerce platforms and for building a social media presence through, say, making videos with local influencers.

“So if you add these costs to the cost of opening a flagship store, to the cost of all the advisory you need, that entails a lot of money, and if you don’t have finance to help you go through this process, it may be really impossible for SMEs to start being in this market,” Enriquez said.

Such type of financing may not be available to companies, Enriquez said. While there are finance solutions for exporters such as letters of credit, there are none for a long-term project like e-commerce.

Enriquez said this is where it’s crucial for governments to ensure that companies will have the funds to engage in all these activities to help them establish a foothold in cross-border e-commerce.

“They need a lot of investment, and it’s not only at the beginning of the project but throughout the process of export,” she said.

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