Survey names e-commerce bottlenecks for MSMEs

E-commerce is transforming the global trade landscape and opening up the international market, but for micro, small and medium-sized enterprises (MSMEs), especially from developing countries like the Philippines, considerable challenges prevent them from tapping into its potential.

“New Pathways to E-commerce: A Global MSME Competitiveness Survey,” published by the International Trade Centre, polled more than 2,200 MSMEs in 111 countries and identified the challenges they face when engaging in e-commerce.

Stories of entrepreneurs building online business empires from their garages in Boston, Bangalore, or Beijing are on the rise, and serve as new business models, said the report.

“Beyond this optimistic picture, however, there are challenges, especially for MSMEs in developing countries. Barriers to setting up an online international presence often limit firms to the domestic market. This matters because e-commerce offers great potential to deliver economic growth, jobs and entrepreneurial opportunities.”

Major bottlenecks for MSMEs in developing economies when establishing an online business are a lack of online visibility and business knowledge, lack of technical and language skills, the high cost of membership fees in e-commerce platforms, poor internet access, limited access to finance, and difficulty in registering or complying with platform requirements.

If MSMEs are able to overcome these initial barriers, many move on to struggle with limited access to international e-payment solutions. “The limited availability of e-payment solutions was frequently reported as a bottleneck, with a visible gap between developed (14 percent) and developing countries (20 percent),” noted the paper.

Main e-payment challenges reported in the survey include a missing link between third-party e-payment service providers and local banks, foreign exchange controls, no availability of e-payment providers, no online banking system, lack of knowledge in e-payment, and difficulty in signing up for encryption solutions.

The survey also examined challenges for cross-border delivery of goods, with costly postal and courier delivery services, and problems finding warehouses abroad emerging as the main challenges.

Bottlenecks related to customs procedures were also reported as a major challenge, which includes cumbersome customs procedures and rules of the application of duties and taxes.

MSMEs face several hurdles in aftersales activities as well, including lack of understanding of consumer rights and enforcement, and lack of customer feedback.