Building bridges to new e-commerce markets
Like building a new bridge, using concrete and steel, exceptional mastery of design and access to appropriate resources to connect two land bodies, bridging a business to an overseas jurisdiction requires careful legal, fiscal and commercial considerations.
In the last two decades, multinationals have expanded their geographical coverage and are now present in most developing countries. Opening a new subsidiary can be expensive for these complex organizations, easily costing more than $50,000 per country in legal and advisory fees. Entrepreneurs from developing countries often have nowhere near this kind of money.
Yet incorporating a company in a developed market such as the United States or the United Kingdom can be incredibly empowering for such entrepreneurs. How, entrepreneurs ask, is it financially possible, let alone commercially viable?
The short answer is that thanks to technology and the evolution in corporate law, small and medium-sized enterprises can now become 'micro multinationals,' a term used back in 2015 by eBay.
An SME from a developing country can adopt ready-made incorporation templates that simplify forming a company.
This approach has been shown to work by international company set-up programmes like those offered by Stripe Atlas for the U.S., or the E-residency program in the European Union by authorities in Estonia. Such programmes provide entrepreneurs with the chance to set up a company for less than $1,000.
Some jurisdictions, such as the United States, the United Kingdom and Estonia, go even further and allow full foreign ownership of locally registered companies.
For example, a Gambian entrepreneur can form and operate their own company in those countries without having a locally resident partner or director, or hiring local employees. They will not even be obliged to maintain a physical office.
Many service providers, such as Payoneer for e-payments, or Mercury bank for banking, accept U.S. companies wholly owned by foreign nationals. There is momentum behind the trend.
Y Combinator online startup school has accommodated more than 100,000 entrepreneurs in their programme in the last three years. The success of the startup model and its openness to developing country entrepreneurs has lead Y Combinator to launch several events in Nigeria and onboard a growing number of African founders.
No matter the founders' origin, a standard structure in the U.S. startup ecosystem is a Delaware C-corporation. Having such type of company allows a developing country founder to access the U.S. market and potentially the whole world since they can now accept international payments and satisfy most trust and compliance requirements.
In combination with e-commerce know-how and tools, having an international structure unlocks the potential for international expansion.
But while e-commerce offers a natural means for companies trading across borders, it is not always as easy as it seems.
Samia Ben Abdallah, the founder of Tunisian jewellery and accessories company AwA, said that even e-commerce entrepreneurs face obstacles selling abroad.
'Tunisia is in the same time zone and only one-and-a-half hours away from Europe - a natural market for entrepreneurs to start their exports,' Samia said. 'So it's a great irony that in this digital era there are still so many barriers to selling goods online from Tunisia.'
Samia said that expanding a traditional retail business into an online seller was not always easy.
'Those of us used to working through traditional channels to sell our products in Europe struggle to be accepted in online platforms and payment solutions,' Samia said.
'It doesn't stop us from exploring the many mechanisms to do so: using our creativity, business and social connections. But best practice would be to work through transparent and fully compliant business structures: we just need a simple and cost-effective way to do this.'
To help entrepreneurs like Samia, ITC's ecomConnect programme is holding a webinar on Building Bridges to New E-Commerce Markets on 20 October from 2:00-3:15 pm (Central European Time).
The session aims to help SMEs explore how innovative business structures and payment solutions can boost online sales (register here to join).
• Anders Aeroe, director, division of enterprises and institutions at the International Trade Centre
• Mohammed Es Fih, cross-border e-commerce and mobile technologies specialist
• Hannah Brown, head of content, Estonian Government e-Residency Programme
• Artem Sokol, head of partnerships and affiliates, CEE region, at Payoneer
• Uygar Turantekin, CEO and co-founder of Launchese
For more information on e-commerce, visit ecomConnect, our online community for e-commerce entrepreneurs or contact the team at the International Trade Centre: ecomconnect [at] intracen.org