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2017/ISOM/SYM/005 Session 2
Promoting E-Commerce to Globalize MSMEs
Submitted by: Policy Support Unit, APEC Secretariat
Symposium on APEC 2018 PrioritiesPort Moresby, Papua New Guinea
5 December 2017
Copyright © 2017 APEC Secretariat
Promoting E-commerce
to Globalize MSMEs
Symposium on APEC 2018 Priorities
5 December 2017, Port Moresby
Presented by
Denis Hew, Director
APEC Policy Support Unit
PSU project on “Promoting
E-commerce to Globalize MSMEs”
• This presentation is based on the PSU project on “Promoting E-commerce to Globalize MSMEs”.
• Comprises of case studies conducted in five economies (Brunei Darussalam; China; Malaysia; Korea; and Chinese Taipei).
• Report can be accessed at: https://www.apec.org/Publications/2017/11/Promoting-E-commerce-to-Globalize-MSMEs
Many e-commerce success stories
to tell…
Christy Ng – Shoes (Malaysia)• Began by posting unique designs on Facebook.• Positive responses led to blog creation with shopping cart
plugins to manage sales.• Full-fledged online store set up in 2011 as demand increased.• Today, online store complemented by physical shops in 5
locations.
Emmanuel Antig – Seashells (Philippines)• Started by taking pictures of seashells bought from
fishermen and listing them on eBay.• By bypassing middlemen, businesses benefit both fishermen
and final customers.• Business has since grown and with more employees.• Most of the sales are international.
SMEs are important for the economy
SMEs’ share of total employment
However, SMEs’ participation in e-commerce is relatively low…
• In Korea, 14.9% of SMEs are engaged in e-commerce, while it is 33.8% for large firms.
• In Malaysia, < 26% of SMEs sell products or services online.
• In Chinese Taipei, out of more than 1.3 mil SMEs, less than 36,600 have registered online stores with the biggest platform, Pchome Store.
• SMEs constitute majority of enterprises in APEC
• The bulk of employment are also with SMEs
Source: Zhang (2013)
Why is success in e-commerce not
widespread among SMEs?
Not all SMEs who venture online make it big. Why?
Why do some succeed and some do not?
What are the challenges faced by SMEs in e-commerce?
What kind of assistance do they need?
Presentation outline
1. Overview of e-commerce market
2. E-commerce ecosystem and SMEs
3. Key challenges faced by SMEso Cross-border e-commerce compounds these challenges
4. Facilitating growth of cross-border e-commerce
Global B2C e-commerce market
will grow to US$3.6 trillion by 2019
• Retail (B2C) e-commerce sales expected to increase to US$3.578 trillion in 2019, making up 12.8% of total retail sales.
• Asia-Pacific, North America and Latin America (where APEC economies are based) - expected to increase its share of retail e-commerce sales from 75% in 2014 to about 85% in 2019.
Global retail e-commerce sales (2014-2019)
Note: Retail e-commerce includes products or services ordered using the internet via any device, regardless of payment or fulfillment method. Excludes travel and event tickets.
Source: eMarketer (2015)
Popular goods traded in
cross-border e-commerce
Source: eMarketer (2017)
• E-commerce requires various actors: online marketing, payment gateway, shipping/ logistics are just some of them.
• Weakness in any of the components of the ecosystem, either due to infrastructure or regulatory constraints, will impact e-commerce, and thus the potential for SMEs to trade via this channel.
To understand the SME challenges,
one needs to understand the
e-commerce ecosystem
Option 1
Option 2
Example of an e-commerce ecosystem
• Poor internet connectivity may lead to low shopping conversion rates (i.e., percentage of visitors buying something on the site).
• Lack of payment gateway infrastructure sellers are unable to sell to buyers who prefer specific payment option.
• Low share of banked population in some economies can be indicative that majority of their population are unable to participate in e-commerce. Some economies however are creative at alternative solutions to cater to unbanked population, for instance through cash payment in retail outlets where products purchased online are delivered (e.g., Chinese Taipei).
• Unreliable logistics system including postal/last-mile delivery may mean lower tendency for purchases to be made via e-commerce channel.
Examples of infrastructure constraints
• Despite the growth of e-commerce, there is poor awareness among SMEs on how to participate and benefit from it.• Few SMEs participate in e-commerce (e.g., less than 26% of SMEs participate in Malaysia).
• SMEs have no or little knowledge of different components of e-commerce (e.g., payments, logistics) and consequently, how to incorporate associated costs in product pricing.
• Many SMEs need more training in business fundamentals necessary to go online (e.g., understand the importance of product suitability for online selling, attractive packaging and pricing; know how to use basic business tools such as Excel for stock-keeping).
Key challenges faced by SMEs:1) Awareness and knowledge of business
fundamentals
SME Sellers
What is it? How can I benefit?
E-commerce
?What are the associated costs?
How do I participate?Should I participate?
Key challenges faced by SMEs:2) Many SMEs get initial experience of online
selling through social media
Sellers BuyersSocial media
• But the social media online market is less demanding than marketplace platforms• In terms of picture quality and proper product pitching • Payment mechanism is unsophisticated (mostly COD) • Limited group of ‘buyers’ (friends), etc.
• Useful training before scaling up, but scaling up transition needs to be learned• How to automate orders• How to respond to multiple enquiries as more and more come online• Keep track of inventories especially if they sell through different online channels
Global Regional Economy-specific
Korea
Indonesia
Chinese Taipei
Key challenges faced by SMEs:3) SMEs face more difficulties joining
marketplace platforms
Examples of global, regional, and economy-specific digital marketplaces
• Popular marketplaces have significant traffic.
• Marketplaces give the possibility to access the global markets.
• Marketplaces usually provide most supporting services to ensure seamless process from payment to delivery, e.g., improving online store design.
• Marketplaces generally have information on cross-border issues (e.g.. tariffs, standards, prohibited/restricted items, etc.) which SMEs have difficulty being informed with on their own.
What are the benefits of marketplace platforms to sellers (including SMEs)?
Key challenges faced by SMEs:3) SMEs face more difficulties joining
marketplace platforms
• SMEs have challenges adhering to terms and conditions set by platforms. Examples are:o Requirement to use fixed logistics providers (some think they can find
cheaper options).o Delivery timeline (e.g., must be shipped out in 24 hours) - this is related to
scaling up difficulties from small operation to suddenly producing bigger quantities.
o Returns policy – mandatory for marketplace platforms but cumbersome for SMEs.
• Value-added services of platform operators help SMEs, but they come with a cost (e.g., inventory management, designing their online store).
Key challenges faced by SMEs:3) SMEs face more difficulties joining
marketplace platforms
• Relatively high logistics cost (possibly due to low sales and hence low shipment volume by SMEs) affect product competitiveness, particularly those with lower price points. o The use of aggregators/consolidators may help.
• May be difficult for foreign sellers to list in domestic marketplace platforms because the rules and regulations for setting up and running businesses vary between economies (e.g., need to be locally registered business).
• Adhering to customs rules and procedures as well as NTMs can be costly for SMEs. Moreover, there are changes in the guidelines pertaining to taxes (VAT/GST as well as tariffs); de-minimis tariff in many economies are put too low which does not encourage cross-border e-commerce.
• Government regulations such as data protection, cybersecurity, geo-blocking (e.g., buyers from economy A cannot access marketplaces in economy B) affect e-commerce in general.
Key challenges faced by SMEs:4) Cross-border issues/challenges
Importance of tailored training and guidance for SMEs; from basic to more advanced training (e.g., knowledge of Excel to effective online marketing).
Facilitating growth of SMEs to do
more cross-border e-commerce
Exchange in ‘best practices’ and innovative models to promote cross-border e-commerce, e.g., Digital FTZ, bonded warehouse, cross-border e-commerce comprehensive pilot zone (China, Malaysia) which can facilitate customs/tax; lower logistics cost.
Clarity and transparency of regulations and procedures relevant to cross-border e-commerce (logistics, customs, standards, product registration, business registration, etc).
o Regular Public-Private Dialogues to understand current and emerging trends in e-commerce and exchange in policy innovations.
Services in e-commerce e.g., O2O (food delivery, repair services, etc) is a growing market but it warrants a separate study.
Thank you !
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