The Sunday Mail
Trade Focus
Allan Majuru
WITH the novel coronavirus pandemic troubling even the strongest economies of the world and the increasing unpredictability of the virus, many are worried about the long-term effects it will have on the economy and business.
This is because Covid-19 has disrupted supply chains across the world and is altering consumer behaviour, which will have an impact on demand for some products and services.
Economists everywhere have concluded that the most dangerous thing about a pandemic such as the one we are battling is our failure to ascertain when the pandemic will end.
Thus, there is no date which companies that have been affected can target to have regained control of markets if they continue using the same strategies and techniques they were using before the outbreak.
For Small and Medium-sized Enterprises (SMEs), the effects of the pandemic are more severe, as most of them cannot afford to cover the cost of doing business under the current environment.
While the future is uncertain, the present has created better opportunities for businesses to ensure they survive and mitigate their losses.
Therefore, it is more critical than ever for SMEs to develop long-term strategies that could change the way they are doing business.
E-commerce platforms, which are digital representation for traditional marketplaces where local and international consumers can browse and purchase products through the internet, have created avenues for small businesses to continue supplying their traditional markets.
Further, the e-commerce platforms have made it possible for businesses that are quick to adapt and adjust to service new markets that have been created by reduced supplies from other suppliers.
A research conducted by the International Trade Centre (ITC) concludes that e-commerce is a lasting and successful solution that SMEs and startups in all sectors can adopt for their businesses to stay afloat.
Figures released by the United Nations Conference on Trade and Development in 2019 indicate that the global e-commerce sales were estimated at around US$29 trillion in 2017 and the number of online shoppers was at 1,3 billion people. Although the bulk of purchases were domestic transactions, the share of those buying from abroad rose from 15 percent in 2015 to 21 percent in 2017.
Given the improvements that have gone into ensuring seamless online purchases and improved internet connectivity, the sales and shoppers’ figures have gone up.
For businesses in developing countries, the use of e-commerce remains low and local companies still find it difficult to address trade imbalances — where goods from overseas seem to be easily accessible than those in another town. There is, however, potential for SMEs to tap into global supply chains if they organise their presence and participation on e-commerce. ITC states that: “The growth of e-commerce is a unique opportunity to open access to international markets for SMEs in developing and least developed countries.”
The potential of e-commerce to open international markets for SMEs means local small businesses must urgently consider setting-up platforms so that they remain relevant in the changing and competitive global economy.
This is because as consumer digital consumption goes up, companies who turn to e-commerce platforms have an endless supply of customers available to purchase their products online.
In the current environment where movement of persons is restricted, e-commerce will undoubtedly bring much needed convenience that consumers prefer, considering they are able to digitally access products and are able to get these products delivered to their doorstep.
Recent researches conducted around the world suggest that the global lockdown has seen a spike in profit margins for companies that provide an online shopping experience.
According to Horticulture Daily, online retailers around the world have been reporting a spike in sales.
In the United Kingdom, Abel & Cole, one of the largest online vegetable sales and delivery companies — has reported a 25 percent increase in sales orders. In fact, as at May 7 2020, the Abel & Cole website is no longer accepting new registrations but only supplying existing customers. Nourish Organic, an Indian online retailer, experienced a 30 percent sales rise between March and April.
With such potential, the question for SMEs is not whether they should participate in e-commerce but how they can participate.
This is because continued delay in setting up online sales channels will negatively affect the current and potential market share for companies as more consumers will gravitate towards conveniently available goods and services.
Currently, ZimTrade, the national trade development and promotion organization, is working on an online platform that is expected to house all exporting businesses in the country, including SMEs.
The online platform is a response to Covid-19 where the objective is to improve visibility of Zimbabwean products and services as well as strengthen engagements with potential buyers.
The platform will be tailor-made to make it easy to onboard small businesses, making sure that their offerings are easily identified by potential buyers in international markets.
Outside this initiative, it is important for SMEs to come up with complementary e-commerce services that will make it easy for potential buyers to order and make payments.
So, what are the important notes for those companies establishing a presence on e-commerce? The secret to successfully transitioning to e-commerce is in knowing your environment and the trends that emerge within it.
First, online stores have mushroomed over the last few years and these provide multiple sites for companies to boost their online sales.
Thus, instead of creating online stores, which is normally costly to set up and manage, some SMEs must consider making use of existing tools. This is convenient for companies that do not have the budget for creating an individual e-commerce site.
Consolidated supplier platforms can also address the high cost of setting up a local e-commerce platform. Internationally, most retail stores create their individual e-commerce platforms to sell their products.
However, for Zimbabwe, more supplier consolidated sites are successfully emerging. Just like products in a physical store, companies need to understand demand to ensure they are successful in their e-commerce venture.
This means, in some cases, local SMEs might need to alter their products to those that are in consumer demand. There are also supply gaps that are being created as a result of Covid-19 and SMEs must quickly identify them and push sales. For example, there has been a sharp increase in demand of re-usable face masks. Already, there are clothing manufacturing SMEs that have changed production priority and are using online stores to reach more people.
One area that SMEs must pay attention to is delivery services. According to the ITC, delivery services, which are a crucial cog in the success of e-commerce — are on an instant rise in emerging markets and this is true for Zimbabwe and countries in the region.
With improvements in delivery services, it should be easier for local companies to increase supplies in cities and countries that do not have a physical presence. However, the direct delivery option is usually costly for SMEs, because in most cases, their products are not highly priced to compensate for freight charges.
To address the challenge, local SMEs must consider supplier consolidation, especially when they are delivering outside Zimbabwe.
SMEs could learn from this and work with existing service providers so that they do not spend more time on establishing functional payment and delivery systems.
This means emerging SMEs can consider such kinds of partnerships so that they ride on existing platforms to drive their e-commerce agenda.
Allan Majuru is ZimTrade’s chief executive officer.
