The full story has been originally featured on UPS.com on June 27, 2022. Read it here.
Two years after the onset of the COVID-19 pandemic, small and medium sized businesses (SMBs) have made significant changes to their business operations. They have been forced to adapt to pandemic-related challenges, but have also taken advantage of new and growing opportunities in e-commerce and digital markets.
UPS, the global logistics leader, partnered with Nathan Associates to survey 1,027 SMBs across nine countries to better understand the challenges they are facing and the ways in which the flourishing e-commerce market can help them grow and compete in the rapidly changing global economy.
Countries included in the survey: Brazil, Canada, France, India, Indonesia, Italy, United Arab Emirates, United Kingdom, and Vietnam.
E-commerce is a driver of economic growth. It has expanded opportunities for SMBs to reach customers in new markets. E-commerce makes it easier for SMBs to export, which in turn increases their likelihood of growth, resilience to economic shocks, and access to new ways of doing business that will sustain their future growth. Governments around the world have recognized the need to support SMBs with a conducive policy environment as they expand into e-commerce and international trade.
UPS has also long supported SMBs on their journey toward growth and Nathan Associates works across the world to build capacity for SMBs as well as equip women-owned businesses to leverage e-commerce.
This report shares the findings and policy recommendations from a survey of 1,027 SMBs in nine regionally and socio-economically diverse countries. Conducted in March and April 2022, the survey captured information about SMB priorities, challenges, and trends in e-commerce sales and logistics, both domestically and internationally. The insights from these surveys informed policy recommendations for government stakeholders to support the growth of e-commerce and international trade activities.
In most of the surveyed countries, the top pandemic-related challenges facing SMBs are declined in-person sales, supply chain disruptions, and cash flow constraints. For many countries, these were also among the top challenges reported by SMBs in a survey conducted by UPS and Nathan in 2021. The fact that in-person sales were consistently repeated as a major challenge shows that SMBs are still relying on them for their business.
The report shows that e-commerce is a top priority for SMBs, particularly when it comes to domestic sales. In most countries, more SMBs have begun selling online since the start of the pandemic. In all countries, the majority of SMBs ranked online domestic sales as their top business priority over in-person domestic sales. This presents a major opportunity and need for governments to provide support to help them reach their e-commerce growth goals.
The SMB trend toward expanding their e-commerce presence is an opportunity to help SMBs make the transition from focusing primarily on domestic online sales to exports. The survey results also show the need for education and awareness about the growth potential of international e-commerce.
Yet SMBs are dealing with multiple challenges and constraints to their e-commerce sales, logistics, and exports. Across all nine countries, the top three e-commerce challenges reported by SMBs that are currently selling online are:
– Online marketing and branding
– Supply chain disruptions
– Accessing information about how to run an e-commerce business
For those SMBs that are not currently selling online, they reported the top constraints to e-commerce entry as being:
– Learning about and complying with digital laws and regulations
– Access to finance
– Cybersecurity and online safety
Although SMBs in many countries reported that exporting has gotten easier since the start of the pandemic, they also reported the following as the top three challenges to e-commerce exports:
– Managing electronic payments and taxes collected from international clients
– Access to information about international markets, trade compliance, and customs requirements
– Facilitation of shipping and trade logistics
The survey also looked at the relative experiences of women-owned and men-owned SMBs. Across most markets, the surveyed women-owned SMBs were more likely to be selling online than men-owned SMBs, both prior to the pandemic and at the time of the survey. Yet in some contexts, women- and men-owned SMBs had different priorities, challenges, and experiences using various e-commerce supports, policies, and services. For example, in the United Kingdom, Canada, Brazil, France, India, and Italy, women-owned SMBs and men-owned SMBs had different priorities, challenges and experiences especially when it came to financing. Given the global gender inequality in access to financing, especially for business growth, this is an important finding that countries should monitor and ensure that financing mechanisms are reaching both women-owned and men-owned SMBs equitably.
The survey also explored the experiences with e-commerce for women and men and found that in some countries, such as Canada and India, SMB owners were less likely to experience harassment and discrimination when conducting business online compared to in-person. While this was sometimes more likely to be true for women-owned SMBs, many men-owned SMBs reported this to be true as well.
Finally, the survey inquired about SMB perceptions about the extent to which their business practices, products, and operations were environmentally-friendly. In all countries, more than half reported that their business is either “very” or “somewhat” environmentally sustainable. In most countries, SMBs indicated they have some plans to invest in increasing the sustainability of their business practices, particularly related to products and product packaging.
Governments, private sector, trade and business associations all have an important role to play in supporting SMBs to capitalize on the opportunities emerging from growing e-commerce markets. The following are some recommendations:
1- BUILD SMB DIGITAL CAPABILITIES. Trainings and information portals should provide information about setting up and running an e-commerce business, online marketing, digital laws and regulations, shipping and logistics, and international trade. City governments and business associations such as chambers of commerce can be particularly important in reaching SMBs. Outreach campaigns and information portals should ensure that information is user-friendly and accessible to a wide range of SMB owners from various backgrounds, levels of education, and geographies.
2- SUPPORT SUPPLY CHAIN RESILIENCE. SMBs in most countries have identified supply chain disruptions as a major challenge. These disruptions can range from lack of availability, lack of transparency in the supply chain, rising costs of raw materials to shipping delays. Both the government and logistics partners can work together to help SMBs with the assessment of supply chain vulnerabilities, management of inventory, technology solutions to conduct better mapping of sources, and efficient and cost-effective transport and delivery services. Investments in increasing supply chain transparency and in logistics infrastructure are necessary. For example, supply chain management software can be used to publish data for SMBs on lead times of raw materials to help businesses plan ahead. Capital allowances or tax breaks can help businesses adopt digital technologies that help them prevent vulnerabilities.
3- EASE ACCESS TO EXPORT INFORMATION. The majority of SMBs in all the surveyed countries ranked access to information about international trade as their primary challenge and priority to support their e-commerce export sales. As part of efforts to build SMB digital capabilities, governments need to scale up outreach and easy-to-understand information about international markets and trade agreements. Information should also help SMBs to navigate export taxes and customs as well as understand how to manage e-payments from international customers. Programs that promote peer learning and partner with women-led firms can also help to reach groups that are often underrepresented in export markets.
4- ENHANCE FINANCING MECHANISMS. There are numerous ways to incentivize and support SMBs to move into e-commerce, grow their online sales, and manage cash flow. Policies should focus on in increasing SMB financing facilities, grants, tax credits, and, if necessary, subsidies. Governments and other stakeholders should expand existing business credit offerings, whether through increasing the volume of financing available or encouraging more small businesses to take advantage of existing programs through awareness-raising initiatives. Special tax credits could help SMBs invest in online business training, try out new outsourcing platforms, or otherwise do what they need to do to increase their capacity for online sales, both domestically and internationally. Programs must track and disaggregate data by gender of the business owner and use proactive outreach methods to ensure that they reach both women-owned and men-owned SMBs.
5- INVEST IN DIGITAL INFRASTRUCTURE. The surveyed SMBs in all countries emphasized the government’s essential role in providing reliable and secure internet access and other digital infrastructure for their e-commerce businesses to thrive. In addition to continuing to expand access to high-speed internet in rural and other underserved areas, governments should improve awareness to the digital tools that SMBs can leverage and help them address challenges with managing e-payments, inventory, returns, and contactless delivery.
6- SIMPLIFY TRADE PROCESSES. To support trade, government agencies should prioritize efforts to digitize customs and tax collection processes to make cross-border trade more efficient, leverage technologies and promote transparency. Some of these commitments have been made by countries at the WTO but are not yet operationalized. Implementing these measures would help small and medium sized businesses open up pathways for greater internationalization.
7- DEVELOP A DATA GOVERNANCE AND CYBERSECURITY FRAMEWORK. A national framework, such as the one developed by the European Union, has the potential to protect SMBs from cybersecurity threats, which limit trust for both the seller and the consumer. Countries that already have such frameworks in place should review them to make sure they have specific measures to support SMBs. These frameworks should also include commitments to developing the cybersecurity workforce by funding programs that provide cybersecurity training and certificates, career growth resources, and hiring opportunities to build a robust cybersecurity workforce capable of addressing the growing cyber threats. Governments should also ensure that this strategy addresses risks depending on various factors, including, but not limited to, gender, especially considering that women-owned SMBs reported they were less likely to experience harassment and discrimination when operating online.
|UPS and Nathan Associates worked with local partners in each of the surveyed countries to reach out to SMBs for the survey. The survey was conducted online via the SurveyMonkey platform and was translated into the predominant language of each country. Because small and medium sized businesses are defined differently in each country, the survey used each country’s unique definition of SMBs for that country-level analysis and report. During analysis, all responses were disaggregated by the gender of the business owner, but these were only included in the report if they were statistically significant or determined to be notable by the researchers.|