Solutions to Micro, Small, and Medium-sized Enterprises' Pain Points in eCommerce

This post is the third in Marketlinks' ecommerce series and is authored by Kati Suominen, Founder and CEO, Nextrade Group and Technical Director, eTrade Alliance. Access the first and second posts.

In the eTrade Alliance, we are solving for the challenges facing micro, small, and medium-sized enterprises (MSMEs) in ecommerce, discussed in our previous blog, at three levels.

Improving MSMEs’ knowledge and capabilities. Few MSMEs today need to be persuaded on why ecommerce matters to their businesses, but most lack the “how-to” of ecommerce transactions, such as how to optimize digital marketing, get paid from foreign buyers, and ship affordably and meet market access requirements. This basic training is one level of our work, and it can be done at scale.

MSMEs that are already selling online can internationalize and scale sales by getting on a global online marketplace or by leveraging direct-to-consumer platforms like Shopify. These MSMEs must master global payments, logistics, and after-sales processes such as returns. Marketplace onboarding can be harder to scale given the need to customize based on MSME products. Further, internationalizing sales requires ruthless screening and selection of firms and product categories, as discussed in our report Roadmap For Empowering Womenled Firms In Ecommerce And The Digital Economy, is critical to ensure that the program translates into sales. 

The next level is to support MSMEs’ digital transformation. Our diagnostics show that the best-performing online sellers have gone far beyond digitizing their sales and marketing by using sophisticated technologies and online services across business functions.

Enhancing ecommerce ecosystems. It takes many players and capabilities to enable MSMEs in cross-border ecommerce, from logistics to payments, financing, and digital services. Our Alliance partners are some of the leading ecosystem players who we work with to pilot innovative and scalable approaches to improve ecommerce ecosystems. A few examples include:

  • Fintechs for working capital. MSMEs that sell online struggle to access fast-disbursing working capital to fulfill orders. We have found that online seller MSMEs increasingly turn to Fintechs to access small loans. In other words, fintechs and ecommerce are highly symbiotic. However, fintechs cannot lend to every MSME. As a response, with PayPal we have helped create a loan guarantee for its fintech partner Konfio to lend to a larger set of Mexican MSMEs, such as traditionally underserved women-led firms. There is also a need to scale awareness-building about fintechs, especially with MSMEs in smaller cities and rural areas with limited trust in fintechs’ benefits.
  • Last-mile and final 50 feet ecommerce delivery. Developing country postal offices, customs authorities, and metropolitan regions are facing a tsunami of ecommerce parcels. The eTrade Alliance, just as the USAID-backed Global Alliance for Trade Facilitation, works to simplify and digitize border clearance and lower MSMEs’ ecommerce logistics costs. We also work in the first and last mile and the “final 50 feet,” which are proportionally the costliest parts of ecommerce delivery. We do this through digital solutions, such as Google Plus Codes digital addressing system, to assign digital addresses for dense urban areas and uncharted rural regions, thereby reducing delivery times and improving success rates. Digital addresses have many further use cases, such as enabling faster emergency services.
  • Corporate digital identity for SMBs to access ecommerce ecosystem services. MSMEs struggle to build trust with customers and service providers online, given concerns over online fraud, requiring rigorous know your customer (KYC) and know your supplier requirements. The Alliance is tackling this problem with a pilot on a data-rich, self-sovereign corporate digital ID aimed to accelerate marketplaces’ customer authentication and verification of MSMEs, banks’ KYC processes, multinationals’ MSME supplier onboarding, and MSMEs’ trust-building with prospective buyers. A digital ID could also promote  interoperability across digital services as an MSME could use one “master key” with the same credentials and data with all service providers.

Aligning digital and trade policies behind MSME ecommerce. MSMEs are increasingly hard-pressed to understand and comply with proliferating national digital regulations, such as consumer protection and data privacy rules. The emerging global regulatory “splinternet” can discourage MSMEs from diversifying their markets. Convoluted regulation must be solved using coordinated approaches, such as via regional integration schemes and trade deals. For example, the eTrade Alliance recently worked with the African Union Commission and African Data Protection Officers to discuss data transfer rules in Africa.

At the national levels, implementing partners can enable developing country governments and associations to learn about and craft digital regulations favorable to online seller MSMEs. Implementing partners can readily use the Alliance’s numerous diagnostics, ideas, and best-practice policy videos as well as databases on policies conducive to ecommerce and “best places” for MSME ecommerce.

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