Just how big is the market for today’s small business?
Date: Wed, 02/10/2016 - 17:26 Source: By Brian Bieron, Executive Director eBay Public Policy
Brian Bieron, Executive Director eBay Public Policy
Image credited to eBay
The Muses, a chain of family-owned music stores across South Australia, had seemingly reached the end of the road in the late 2000s. Between a dragging economy, a rapidly digitizing industry and a seemingly endless flood of new and different competitors, the business was in jeopardy. The owners attempted to sell inventory online, but didn’t find success. However, long-time employee Paul Vallen wasn’t ready to give up on the store. While helping liquidate the stock, Paul saw the potential for reaching new markets on eBay, and the owners agreed to sell Paul and his wife Tori the business for just $2.00 so it could live on as an online business. eBay enabled The Muses to reach a new cadre of enthusiastic music lovers around the world, and sales quickly exceeded the couple’s expectations.
Entrepreneurs like Paul and Tori are participating in a game-changing shift in the global economy. While big box chains, a sluggish economy, and the limitations that come from being tied to brick-and-mortar stores are bringing many small businesses to their knees, something unexpected is happening at the same time. Successful entrepreneurs are beginning to leverage technology and the flood of new global marketplace platforms to reach consumers and trade goods in new ways. Platforms like eBay are leveling the playing field, allowing small businesses to open with minimal start-up costs and compete head to head with the massive global players that have dominated global commerce over the past two decades.
We’re seeing this trend play out in every corner of the globe. Which made us wonder — just how big is the market for today’s Internet-enabled small businesses?
To answer that question, we examined eBay trading data from 2010-2014 in 10 countries to better understand how small businesses benefit from technology and access to digital trading platforms. eBay datasets covered the activity of sellers with sales of more than $10,000 annually on the eBay marketplace, which for the purposes of this report are called “eBay Small Business (SMB) Sellers.”
The Digital Boom
In both advanced and emerging markets, eBay Small Business Sellers are outpacing the overall economy. Yonghoon Kim, an eBay small-business owner selling auto parts in South Korea, has successfully leveraged the platform to reach customers worldwide and grow his business 10-15 percent every year. And he’s no exception. In Korea, Established Commercial Sellers, defined as sellers on eBay who operated as eBay SMB Sellers for the duration of the research period (2010–2014), averaged 19 percent sales growth year over year compared to 9 percent increase in GDP year over year. eBay’s Established Commercial Sellers are experiencing very solid growth rates — with many countries we examinedaveraging 20 percent or more per year.
And they’re growing much faster than their traditional small business counterparts. In the U.S., Brazil, Italy and India, the average annual growth rate of the sales of Established Commercial Sellers is much higher than offline economic growth over that same period.
On eBay, small businesses are no longer limited to selling to customers in their community. In fact, more than 95 percent of eBay Small Business Sellers export; and in Mexico, Brazil, Colombia and Korea 100 percent export.
The ability to export via eBay saved Andrea Gönner’s textile business, Garnwelt, in Riedlingen, Germany. Garnwelt is another story of a local business owner that turned to online sales when their brick-and-mortar business was poised to shut its doors. Gönner and her husband Hans turned a simple liquidation channel into the business’s primary revenue stream: they now employ 40 people and sell to customers all over the world.
Disappearing Barriers to Entry
Shipping, language, customs, and access to capital resources have typically hindered small businesses from entering the global market. Digital marketplaces are addressing many of those barriers head-on, the effects of which are probably the most pronounced and impactful in developing countries.
Leather artisan Mohammed Taushif Ansari in Mumbai, India exemplifies the tech-enabled, developing market entrepreneur. His business, Skin Outfits, sits in a country with possibly the greatest representation of the successful intersection of technology and commerce in the world. Indian entrepreneurial artisans like Ansari – many of whom come from humble, rural beginnings – are defining a new generation of “multi-national.” And they are expanding quickly: 82 percent of eBay SMB Sellers in India are Newcomers. Newcomers are defined as eBay SMB Sellers in 2014 who started operating on eBay in 2011 or later and they are growing at a rate of 28 percent - that’s nearly six times the annual GDP of India which is five percent.
There are other bright spots for Newcomer growth in developing economies elsewhere in the world – Latin America is a standout. eBay SMB Sellers in Mexico and Colombia are starting eBay businesses at unprecedented rates: 56 and 70 percent of eBay SMB Sellers in those markets, respectively, are Newcomers.
Welcoming more small business sellers into the global market benefits us as consumers with more choice and creates infinite opportunities for entrepreneurs looking to build and grow their business. Our data paints a bright future for these small businesses, and our technology will continue to support their dream of a more inclusive economy.