Harnessing the forces of e-commerce for development (en)

Since its creation 20 years ago eBay has been a significant force in promoting small businesses and entrepreneurship across the United States of America and Europe. Today there are 25 million active sellers on eBay, many of them making a living selling online.* During a recent visit to Africa I had the chance to meet with two Rwandan-based eBay sellers and was able to experience first-hand how online trade creates sales opportunities.

I strongly believe in the potential of e-commerce to enable entrepreneurship in developing countries similar to what is underway in advanced countries. Proactive action is needed to realise this potential. There is an opportunity for the public and private sectors to join forces in helping small businesses access global markets. That opportunity is very real considering the rapid technological advances in developing countries.

In short, e-commerce benefits small businesses because it can connect them to a global customer base they cannot reach otherwise.

A recent research paper** by Hanne Melin of eBay’s Public Policy Lab shows that e-commerce has been a powerful export enabler for small businesses in advanced and developing countries alike. Essentially, in e-commerce the geographical distance between sellers and buyers becomes insignificant. In the case of online trade with developing countries, distance matters 94% less than in traditional trade. This leads to e-commerce-enabled small businesses becoming veritable export champions: while traditional businesses merely engage in exporting at all, 97% of technology-enabled businesses export and they reach as many as 40 destinations on average.

Getting a store set up online and understanding customer behaviour and preferences in foreign target markets is challenging. That is even more so when questions around export regulations or import taxes come into play. Selling across borders comes with significant complexities and small business need help overcoming them. While local e-commerce in developing countries is booming, online selling on international e-commerce platforms has yet to take off.

While visiting Rwanda I was impressed to see how far e-commerce has come in such a short time. For example, Kaymu – the local eBay – has expanded to 17 African markets in less than three years. Mobile connectivity in Kigali is often better than what I experience in Europe. On every street corner you can buy SIM cards for the 4G network and mobile money is omnipresent.

While local e-commerce is a big step forward for the national economy, local businesses have yet to take advantage of the benefits of cross-border e-commerce. A meeting at the Rwandan Ministry of Commerce involving 30 small businesses showed that they all cared for reaching a larger customer base but lacked the skills and knowledge to run an online storefront and serve foreign markets.

A recent pilot project run in the German town of Mönchengladbach can serve as a model for the public and private sectors to join forces to help small businesses realise cross-border trade opportunities.

Mönchengladbach’s private-sector development authority turned to eBay in early 2015 for help on an e-commerce pilot aiming to bring local businesses online. Within a short period of time 77 brick-and-mortar stores were recruited, including a pharmacy, a shoe shop and an electronics reseller. eBay’s merchant development team assisted these businesses with establishing an online presence and advised them on marketing their products to local as well as foreign customers. The results were encouraging: within six months the participating businesses sold a total of 65,000 articles generating €2.5 million (US$ 2.8m) in additional sales. Most importantly, the majority of them engaged in exports, reaching customers in 79 countries.

This model is applicable to developing countries in one form or another. The craft of selling online is very similar around the world. The added challenge in developing countries is dealing with customs, getting the merchandise shipped timely and collecting payments from foreign customers.

It is crucial, therefore, that entrepreneurs get appropriate support. I am excited to see the International Trade Centre (ITC) developing a programme to assist small businesses and entrepreneurs in exporting online. By joining forces with the right partners from the private sector, ITC puts itself in a unique position to accelerate the trend towards a more inclusive global trading system – creating trade impact for good.