Getting At the Priority Challenges for MSME eCommerce Development
This post is the second in Marketlinks' ecommerce series and is authored by Kati Suominen, Founder and CEO, Nextrade Group and Technical Director, eTrade Alliance. Read the first post here.
Through the eTrade Alliance, we dissect challenges faced by developing country micro, small, and medium-sized enterprises (MSMEs) in two main ways and develop programmatic priorities to address them.
The first is by charting the challenges faced by firms of different ecommerce maturity. We find in market after market five archetype MSMEs sellers: global marketplace sellers that leverage global marketplaces like eBay, Etsy, and Amazon; regional marketplace sellers that use such platforms as Jumia, Mercado Libre, and Lazada; sellers with their own online stores and direct-to-consumer sales capabilities; social sellers that use social media and messaging apps to market and transact with customers; and offline sellers that do not use social media or online sales capabilities.
While most developing country MSMEs are social sellers, established MSMEs and large firms in metropolitan regions are already using regional and global online marketplaces and prioritize ecommerce as a growth lever. Marketplace sellers use a wide variety of digital technologies and services to streamline their operations, derive a strong share of their sales online, and are much more export-driven than social sellers. In the eTrade Alliance, our task is to enable more developing country firms to grow into these dynamic, trade-driven online and marketplace sellers.
Each firm segment has distinct needs when engaging in ecommerce. Firms that already sell online through their stores and marketplaces typically express interest in furthering their capabilities for doing digital marketing, maintaining competitive online stores, managing their online channels, and accessing working capital to fuel their online sales. Meanwhile, social sellers often report struggling to finance their online sales capabilities, accessing proper talent for their ecommerce businesses, and fulfilling costs and customs procedures – challenges that marketplace sellers have already to some extent solved for.
Small offline sellers located in rural areas report having the greatest challenges, especially due to poor internet connectivity and logistics. However, they are often the least motivated to seek to engage in ecommerce, perhaps in part because their customers are local and less digitized.
In addition to the daily “nuts and bolts” challenges of running an online and omnichannel business, digitizing developing country firms report growing cybersecurity concerns and limited ability to keep up and comply with proliferating national digital regulations, as countries around the world adopt their distinct consumer protection, data privacy, and digital tax rules, among others.
The second useful way to dissect MSMEs’ ecommerce pain points is by considering the ecommerce sales cycle. In the ideal world, a buyer anywhere in the world would, at one click, purchase a product, payment would automatically flow to the seller, and the seller’s fulfillment system would readily pick and pack the product, fill out requisite customs forms, and deliver the shipment to the buyer’s doorstep. This one-click world is increasingly in sight but still distant, especially in the developing world. For MSMEs in different markets, the weak links in the ecommerce sales cycle vary – for some it is about cross-border payments acceptance, while for many others the pain point is delivering reliable after-sales service. Still others get stuck on arcane customs procedures.
Implementing partners, often instinctively thinking about “training” when thinking about enabling MSME ecommerce, will want to be just as focused on the many challenges in the enabling environment for ecommerce as on cultivating MSMEs’ own capabilities, in order to catalyze small businesses’ online transactions. In our eTrade Alliance, partners agree that the payoffs from MSME capacity-building are meager if MSMEs cannot accept digital payments, or if trade compliance and digital taxes obliterate their margins. For more on our ideas on solutions, stay tuned for the third blog in this series.