Small businesses face big barriers to global trade. But online shopping can help Image: REUTERS/Ralph D. Freso
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‘Tis the season to shop online. Rather than braving the high street, why not open your browser? E-commerce sales worldwide hit an estimated $25.3 trillion in 2015 and are likely to have grown since.
The internet makes buyers and sellers more visible and accessible to each other locally and globally. The international bit is really interesting. The opportunity to connect quickly and efficiently to multiple markets can be a boon for smaller businesses and a great attraction for consumers. Without e-commerce, establishing a physical presence in multiple markets can be costly, while consumer demand might also not always be clear. Survey after survey has shown that the number one limitation to buying and selling across borders is information – exactly what the internet excels at.
Entrepreneurs everywhere dream of their start-up being “born global,” identifying a niche and reaching customers around the world from day one. Latin America’s largest e-commerce platform, MercadoLibre, started in a garage in 1999 with 100 products on a website.
Unfortunately international e-commerce isn’t always easy. Cross-border e-commerce represents around 7% of total business-to-consumer e-commerce, even less in some regions. When was the last time you ordered something online from the other side of the world?
Even in developed and highly integrated markets such as France and Germany, try to buy a book or film across the no longer visible physical border and you’ll find it’s still very present in cyberspace. “Suitcase traders” ferrying online purchases from one country to another are still an active community.
The issues holding back cross-border e-commerce range from limited access to e-payments, delivery logistics and costs, warehouse access, product returns processes, complex consumer protection regulations, fees for e-commerce platforms, retailers protecting price differentials, lack of technical skills and business knowledge.
So although global e-commerce potential is warming up, we’re not quite there yet. And certainly, more could be done to ensure that these new tech-driven opportunities are widely utilised. Here are five options to think about:
1. Plug the digital divide
E-commerce can’t work without reliable Internet. Some four billion people across the globe still don’t have access to or use the Internet. Infrastructure is a major hurdle – particularly in rural areas. High-speed broadband can be unaffordable in a number of places. Lack of locally relevant content and skills are another drag.
The complexity of these challenges requires a multi-dimensional response. The Internet for All initiative, for example, brings together leading organisations across business, civil society and government to create partnerships to address Internet access and use barriers. The initiative is currently delivering projects in four countries - Rwanda, South Africa, Jordan and Argentina. The approaches vary according to local need, in some instances working on digital skills, in others on connectivity for refugees.
2. Map out the ecommerce how-to
There is a general need for deeper consensus on best practices for facilitating e-commerce. Certain e-commerce tools have already been around for a couple decades or more. Equally, e-transaction related policies have long been on the books in some places.
But approaches vary between countries and don’t always take into account the cross-border element. Policy communities involved in different aspects of e-commerce may also not be aware of each other’s’ work. For example, the overlap between financial system regulators and the trade community is not as high as it might be in the context of borderless e-payments. The specific challenges facing small businesses in e-commerce – as well as solutions – may not always be clear. Supportive industry efforts could also be explored.
A new Enabling E-commerce initiative led by the Forum, WTO and eWTP aims to bring together leading voices from governments, businesses and other stakeholders for public-private dialogue on e-commerce policies and practices that can benefit small businesses. The collaboration will further explore these issues to drive a more inclusive global economy.
3. Act on good data
E-commerce is currently quite difficult to measure due to different national definitions, methodology and scope of data collection. An absence of e-commerce data hampers targeted policies and affects companies’ decision-making and investments. The lack of data may feed fears too – is the digital economy facilitating VAT workarounds and the like?
A joint effort by various UN agencies and other intergovernmental agencies such as the Universal Postal Union, World Bank, World Customs Organization and World Trade Organization (WTO) to improve the measurement of cross-border e-commerce is a helpful step in the right direction for informed discussion.
4. Let trade deals help
WTO Members agreed a trade deal four years ago to cut red tape for goods crossing borders. The Trade Facilitation Agreement (TFA) is helpful for small business and e-commerce. As this type of trade often involves lower value packages, extra transaction costs eat into margins. Long delays in between order and delivery may affect consumer ratings and confidence.
Collaboration between governments on trade policies in other areas could also help. About 27% of FTAs notified to the WTO already have “e-commerce chapters.” These touch on issues such as regulatory transparency and cooperation, digitized customs, online consumer protection and capacity building, among other things. The chapters could be used as a basis to examine where trade policy can contribute to promoting best practices or addressing problems.
5. Regional digital integration
The impact and responses to e-commerce are by no means uniform across all countries. Regional approaches, however, offer a test ground for best practices. A regional market could also help small businesses pilot export models.
The Association of Southeast Asian Nations (ASEAN) has been collaborating on digital integration since 2000. Good progress has been made in some areas, such as on trade facilitation and e-transactions, while more work is needed around the data flow governance, cross-border dispute resolution and digital payments. Separately, Asia Pacific Economic Cooperation (APEC) economies agreed to a Blueprint for Action on E-commerce in 1998 to work on both domestic and international flows; focused on the needs of small businesses and encouraged better data collection and measurement. Efforts have continued among the group since.
Elsewhere, Pacific Alliance nations – including Chile, Colombia, Peru and Mexico – have included an e-commerce chapter in recent integration arrangements. The EU, meanwhile, aims to deliver an improved digital single market by 2020 to boost jobs and other benefits.
Trade’s got a future online
Global trade has come under fire of late. Some see it as taking away their job. Others consider the rules unfair or don’t feel like they experience any benefits.
It is true that the opportunities of an open global economy have not yet delivered for everyone. Small businesses face a lot of hurdles to going global. By improving their way into international markets, e-commerce could change that, and bring us closer to an inclusive global economy.
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The views expressed in this article are those of the author alone and not the World Economic Forum.
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