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How Selling Online Helps Small Businesses in the Developing World Break into Export Markets

Posted on the 02 May 2016 by Center For International Private Enterprise @CIPEglobal
From the report on page 14. It shows that in 2014, eBay was the primarily an export platform for the eBay-enabled SMEs in Chile, Colombia, South Africa, Indonesia, and Thailand

From the report on page 14. It shows that in 2014, eBay was the primarily an export platform for the eBay-enabled SMEs in Chile, Colombia, South Africa, Indonesia, and Thailand

Can e-commerce markets help create a more inclusive global economy where small and medium enterprises (SMEs) from developing countries can export their products overseas without facing major obstacles? According to a recent report published by eBay Public Policy Lab, Small Online Business Growth Report: Towards an Inclusive Global Economy, the answer is yes.

As the World Economic Forum notes, internet-based commerce sites have a positive impact for SMEs around the world because they open up new export opportunities, facilitate access to low-cost imported inputs, and e-commerce marketplaces make it easier to globally sell and source goods by reducing non-tariff barriers to trade, such as access to information.

The eBay report looked at its own data to examine if these arguments were true. The datasets of transactions from small online business (sellers with sales of more than USD $10,000 on eBay marketplace) from 2010 to 2014 in 18 countries, including emerging markets like Brazil, Mexico, Colombia, Chile, South Africa, India, Indonesia and Thailand.

The overall findings were surprising for how strongly SMEs in developing countries perform on eBay:

  • Nearly all eBay-enabled SMEs are exporters, while most traditional businesses do not export. Of 18 countries examined, nine nations (eight of which were emerging markets) had 100 percent export rates meaning that every eBay-enabled SME based in the country was an exporter in 2014.
  • SMEs using technology-based platforms outperform traditional SMEs by an order of magnitude. For example: the 2002 World Bank Exporter Dynamics Database noted that traditional Colombian exporters reached 3 country markets, whereas eBay-enabled SMEs from Colombia reached an average of 18 foreign markets.
  • eBay-enabled SMEs in emerging markets maintained similar performance results as the eBay-enabled SMES in advanced economies.
  • Traditional trade costs and institutional factors, such as trade agreement or distance, mattered less for eBay based traders. The main barriers for digital market sellers and buyers are shipping costs and lack of common language.
  • Technology-enabled platforms like eBay are helping SMEs to get discovered by customers in foreign markets without the business owners using limited resources to travel overseas to network or find new customers. The reduction in costs helps increase SME participation in the global economy.

While the data used for this report is limited, the findings show that economic growth of SMEs that can sell goods on e-commerce sites is robust. Therefore, as developing countries continue to face sluggish economic growth today, policymakers should heed the importance of the digital economy and inclusive global development. For example, one possible policy recommendation to better facilitate technology-enabled SME trade is expanding the access to the internet worldwide, which is Goal #9 of the SDGs.

Read the full report to learn more about how eBay-enabled SMEs performed in the global marketplace.

Maiko Nakagaki is a Program Officer for Global Programs at CIPE.

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