Cross-border e-commerce helps SMEs reach global markets
and medium-sized enterprises
Junpu is a small village of 3,000 residents in China’s southern province of Guangdong, which was very poor before the fast development of e-commerce in China. Today, more than two-thirds of the residents make their living on Taobao, China’s largest e-commerce site, selling local produces and other popular products to domestic and international customers through more than 3,000 online stores operated from the village. The village also has a ‘Taobao Academy’ providing training to aspiring young people who have just started their online businesses.
This phenomenon is not limited to Junpu. By the end of 2015 China had some 780 Junpu-style ’Taobao villages’ across the country, which is defined as any place where 10% of the population is engaged in online retailing and generating at least 10 million yuan (US$ 41.5 million) annually in online sales. E-commerce has brought tremendous changes to these rural areas, many of which were previously isolated from urban markets because of the lack of channels to advertise and deliver local products to consumers. Through Taobao’s integrated solutions, the untapped potential was matched with the demands from domestic and international markets, bringing revenue and growth to once economically underprivileged areas.
Just like Taobao’s e-commerce helped millions of village residents to connect to urban customers, cross-border e-commerce, an emerging form of international trade facilitated by e-commerce and big data, may provide greater opportunities for companies and individuals in developing countries and least developed countries to connect to the customers beyond their national borders.UNDERESTIMATED MARKET
Cross-border e-commerce is perhaps the fastest growing segment of global trade, growing from practically zero two decades ago to an estimated US$ 1.92 trillion globally by the end of 2016. This is only a fraction compared with the size of the domestic e-commerce markets in many countries. For instance, online retail now accounts for 13% of consumer spending in the United States of America and around 10% in Europe. In China, domestic e-commerce was estimated at US$ 2.8 trillion in 2015. As market conditions and regulatory framework improve, cross-border e-commerce has the potential to become a prominent form of international trade, particularly for the consumer products with diverse demands.EASY BUSINESS
Alibaba Group, which owns Taobao, operates with a mission: make it easy to do business anywhere. Small and medium-sized enterprises (SMEs) have always been at the heart of Alibaba’s operations. It strives to make international business for SMEs as simple and cost-efficient as possible. It has built a comprehensive ecosystem for SME e-commerce and the services cover virtually all key areas essential for SMEs, including financing options, payment, shipping, delivery choices and logistics solutions.
Alibaba strives to help SMEs to scale up and grow. For instance, to help overcome challenges of access to finance, Alibaba provides SMEs operating on its e-commerce platforms with microloans. To help increase trust between suppliers and buyers, the company launched a free product called Trade Assurance. According to the previous authentic trade records, Alibaba could provide an amount of assurance up to US$ 1 million for the Chinese suppliers on its platforms. If the supplier fails to ship the products on time or the product quality does not meet the standards set in the contract, Alibaba will directly refund the payment made by the buyers within the amount of trade assurance. This can provide a lot of confidence and protection to the overseas buyers.
Alibaba’s vision is to build the future infrastructure of commerce. In coming decades the company will contribute towards building a global e-commerce market without boundaries. Therefore, it is actively pushing for better policies for global trade. The implementation of the Trade Facilitation Agreement by the World Trade Organization and its members will significantly reduce the trade costs for SMEs. Alibaba is also calling for the establishment of an Electronic World Trade Platform, or e-WTP, in the context of the G20 to facilitate the public-private dialogue with the policy makers for better business environment for SMEs engaged in cross-border e-commerce.
As Jack Ma, the founder of Alibaba Group, has said, the company only does well when the SMEs on its platforms do well. As the group globalizes, it is taking its commitment to SMEs growth beyond China’s borders. Junpu’s Taobao Academy now regularly receives delegations from foreign countries to provide trainings to SMEs around the world on how to do business on Taobao. The group has recently launched a SMILE (small and medium industries leveraging export) platform in India that provides trading solutions such as financing, logistics, inspections and certifications, and training for SMEs.
Cross-border e-commerce is the future of the global trade and Alibaba stands ready to help SMEs catch that wave and expand business globally.