How Ecommerce Helps Small Businesses Go Global
Having a global footprint may be a goal for many U.S. small businesses, but for most it's not a reality. In fact, surprisingly few small U.S. companies export.
Now e-commerce platforms are easing some of that burden.
A report commissioned by eBay finds that more than 190,000—or 90 percent—of its small and medium-sized businesses used its platform to export in 2014. To compare, in 2009, fewer than 30,000 were exporting. The findings come from eBay's Public Policy Lab in its2015 U.S. Small Business Growth Report.
Despite that growth, less than 5 percent of U.S. small businesses overall are exporting, according to estimates from the International Trade Administration. Barriers include language difficulties, hurdles with customers and the cost of shipping.
"The path to exporting is very challenging—especially for small businesses," Jody Milanese, vice president of government affairs for the Small Businesses Exporters Association, said in an email message. "The main barrier is a lack of information and an unclear understanding of where to start. The U.S. system and assistance can be overly complex."
Sellers who are exporting on eBay's platform have a broad reach, with 80 percent selling in more than five export markets, according to eBay's report. Further, 35 percent of exports by U.S.-based small businesses on its platform go to Trans-Pacific Partnership countries, the report said.
"We want to raise awareness about how the Internet has enabled small businesses to become really global traders," said Brian Bieron, executive director of eBay Public Policy Lab. "We're cutting the hurdle for [American businesses] to go to a non-English-speaking consumer. The barrier of language, when you are an American-based small business, makes exporting a hard thing to do."
Opening up global markets can be a huge boost for a small company. Gelb Music, which has been in Redwood City, Calififornia, since 1939, turned to eBay for exporting seven years ago, testing out 200 items. It did $200,000 in sales per year. Today, it has nearly quadrupled that number, with exports making up nearly 30 percent of its overall sales, said Mike Craig, Gelb's e-commerce manager. Export fees vary depending on items sold, how they are sold and where they are being shipped.
"When you look at traditionally trying to ship overseas—we didn't understand the laws, and the costs were outrageous," Craig said. "Shipping a guitar to Australia cost $300, but through their global shipping program it may cost $100. We had slow times and construction going on here—eBay helped save the store."
Rivals are also in the game
EBay's report deals exclusively with its own platform, but it's hardly the only game in town. Alibaba, the Chinese e-commerce giant, does not break out how many U.S. small businesses sell on its site, but CEO Jack Ma has repeatedly said the company "fights for the little guy." The company told CNBC that revenue from outside China represents 5 percent of its business.
Etsy.com, which sells handmade goods and vintage items, has more than 1 million sellers reaching 19 million buyers around the country. Small businesses are the lifeblood of the site, and while Etsy won't break out how many of their small business sellers export, it did note that there are people buying and selling on the site in nearly every country in the world.
Amazon.com, which has more than 2 million active sellers, declined to say how many of its small U.S. based businesses are exporters.
And while a small percentage of American businesses chose to export, those who are exporting make up the majority of companies exporting from the U.S. as a whole. Overall, 2013 Census data show that of all U.S. exporters, nearly 95 percent are small or medium-sized businesses, with 295,241 exporters accounting for more than $477 million in trade.