While many South African SMEs went online in response to the pandemic, an overwhelming majority still do not sell their products internationally as a result of several barriers, such as shipment-related issues.
This is one of the key findings of the SA SMEs' digital response to the pandemic research report, compiled by World Wide Worx on behalf of PayPal and FNB.
The report, which provides a landscape of businesses’ multi-channel approach to drive growth, features data and insights from 400 surveyed local SMEs from across sectors. The findings were released during a webinar yesterday.
It found that more than half (56%) of surveyed South African brick-and-mortar SMEs created online shopping channels in response to the pandemic and extended the number of online payment platforms they offer to customers.
Although nearly a third started targeting international customers, 79% of respondents said they do not offer their products and services to international consumers, and 44% said this is because they do not think their business has the potential to grow its sales base internationally.
The biggest deterrents to cross-border selling for SMEs were shipment-related issues (65%), custom duties and taxes (54%), cross-border payment issues (36%), refunds and returns (35%), marketing internationally (14%) and other reasons (7%).
Releasing the research findings at the webinar, Mark Mwongela Ngungi, PayPal sales development director for Africa, said cross-border selling roadblocks present opportunities for payment platforms to work with merchants in seeking solutions on how they need to support businesses looking to grow beyond local borders.
“Around 20% of surveyed businesses do cross-border selling, with half of them saying they do see the potential in other markets, but there are issues they need to address in order to increase their international sales,” explained Ngungi.
“Both the shipment issues and custom duties barriers touch on the importance of seamless delivery of goods. Customers these days want to receive their items within a very short time and these two factors continue to be a challenge to cross-border selling. Issues around refunds and returns speak to cross-border payments – payment companies need to work with businesses around the issue of accepting cash in different currencies and making the process frictionless for customers.”
According to Ngungi, operating internationally can be challenging for small businesses, which lack education on market opportunities outside SA’s borders. They generally aren’t familiar with fulfilment methods, and need to become more comfortable with global payment methods.
Of those that offer products and services to international consumers, 48% said up to a quarter of their sales come from a global market, while 23% said up to half of their business is boosted by offshore customers, and 15% said most of their business comes from outside SA.
Local is lekker
In terms of e-commerce growth locally, the report shows online shopping is well-entrenched with local consumers, and customers are comfortable with the payment options on offer.
Four of five businesses (79%) surveyed say their local customers are comfortable shopping online and making online payments. Accepting orders through online shopping carts has had an overall business impact on 71% of responding businesses, with 74% having started automating their activities in response to the pandemic, the survey shows.
Says Arthur Goldstuck, CEO of World Wide Worx and lead researcher: “Nearly two-thirds (64%) of businesses have introduced more online payment methods in response to the pandemic, enabling more customers to pay via the methods they want. This speaks to the maturing of the sector and businesses' drive to provide their customers with the payment methods they prefer.
“Automating their operations is known to increase customer service and decrease costs, which is why a further 17% are intending to make the shift in future.”
Factors causing hardship locally flagged by the respondents include lower customer demand (46%), supplier issues (38%) and delivery to customers (35%). Connectivity, which has traditionally been a problem, was only mentioned by 4% of businesses, notes the report.
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