By Bob Brewer, Braumiller Law Group
What are SME’s? They are small and medium-sized enterprises that make-up the backbone of world trade and growth. A World Bank Group study suggests that there are between 365-445 million MSMEs in emerging markets: 25-30 million are formal SMEs; 55-70 million are formal micro enterprises; and 285-345 million are informal enterprises. In the U.S., the Small Business Administration (SBA) defines a small business as a firm which has fewer than 500 employees. (This varies by country) There are 30.7 million small businesses in the U.S. which account for 99.9 percent of all U.S. businesses. These small- and medium-sized businesses are responsible for creating roughly 1.5 million jobs annually in the U.S. with roughly 57 million employed. Obviously, the pandemic has greatly affected the employment via SME’s. The current U.S. unemployment rate is 6.7% for November 2020, per the Bureau of Labor Statistics. Will there be another stimulus in the U.S. before 2020 ends? Talks are still in session. If there is an agreement, it would provide for another $288 billion for small businesses, including the popular Paycheck Protection Program of forgivable loans.
Given these numbers above, and just how important small and medium size businesses are to world trade, and the global economy, as I often say, it begs the question of who in the crumbling pandemic world we now live in is doing what to assist with the survival and hopefully continued growth of SME’s. Especially when a pandemic has wiped out so many in the past 9 months.
At this time, the coronavirus has shuttered about 30% of SME’s in the U.S. In countries like South Korea, 50% of the SME workforce has been laid off. The lifeline of world trade is suffering, but many have managed to hang on by shifting to ecommerce solutions, which brings us to the world’s largest online retailer, a model of sustainable ecommerce growth, and just how they, Amazon, are saving the SME’s on their platform from some otherwise potentially very dark days. I think Amazon is a good representation of what SME’s can accomplish in a well-orchestrated partnership.
An example perhaps? Here’s one: By the third quarter of 2020, 54 percent of paid units sold on Amazon were via third-party sellers. (SME’s) That was substantial enough for Jeff Bezos to pull the trigger and invest an additional $100 million to help small businesses around the world increase their sales and reach new customers on Prime Days. Amazon was not forthcoming on the numbers, but analysts estimated total sales anywhere between $9.9 to $11 billion over the two-day period, which represented about a 43 percent increase from last year. Prime Day’s incredible growth of course runs parallel with more people being locked down from the coronavirus restrictions, but nonetheless, it established some very impressive numbers. Overall, Amazon sales are expected to reach almost $795 billion this year, up about 32 percent from last year. At the close of this less than stellar year for many in the next couple weeks, Amazon will have invested more than $30 billion, between 2019 and 2020, in logistics, tools, services, programs, and human resources to assist in the growth of SME’s. ($18 billion was spent in 2020)
Major markets for Amazon are, obviously the U.S. with annual sales of just under $200 billion, Germany $23 billion, the U.K. $18 billion, Japan $16 billion, and the rest of the world $31 billion in annual sales. Let’s take a look at some of the initiatives in these top markets. Germany’s new cooperation with Amazon opens up a new digital sales channel for ING Bank. Amazon acts as a broker and presents loan proposals on the lending page of its selling portal to eligible business who sell their goods via the platform. Sellers are directed to ING’s website where they can submit a credit application to ING. The government has committed to investing a total of €10 billion between next year and 2030 with the hope to create an additional €20 billion in private venture capital investments. The 2021 budget will see the government provide $2.4 billion via Germany’s developmental bank, the KfW, and other channels to help new and growing companies grow. ING in Germany will provide these sellers with loans of between $10,000-$750,000 with a repayment period of up to three years. Note, there is an Amazon worker Black Friday strike in Germany as Amnesty International urges them to unionize.
Meanwhile, in the U.K Amazon has invested heavily, with funds distributed of more than $18 billion over the last 10 years. The company employs just under 30,000 people across the U.K., and pays its associates industry-leading pay. Recently the U.K.’s competition regulator has confirmed it’s happy, actually very jolly this time of year, for the tech giant to take on 16% of local on-demand food delivery app Deliveroo, which will be huge in a pandemic lockdown in London. On the other end of the spectrum, ten years prior to entering the U.K, Amazon entered Japan, and currently do not dominate, but instead remain in a stiff competition with Rakuten. It’s a close race though as 70% of online consumers use Rakuten, compared to 66.7% for Amazon Japan. As a note of scale, 99.7% of Japan’s 4.21 million companies are SMEs.
In other major markets around the globe, like India, Amazon has made some ambitious commitments to SME’s. Bezos said that Amazon is laying the groundwork to make exports of locally produced goods from India equate to an estimated $10 billion in sales on the Amazon platform by 2025. Per Bezos, over the next five years, Amazon will invest an incremental $1 billion to digitize micro and small businesses in cities, towns, and villages across India, helping them reach more customers than ever before.
In another part of the Amazon global ecommerce community of SME’s, just this May (2020) Amazon extended an invitation to assist small business in Singapore. As part of Enterprise Singapore’s E-Commerce Program, Amazon invited local small and medium-sized (SME) retailers interested in making their products available to more customers and growing their businesses online, to sign up with Amazon.sg. Eligible small and medium size businesses could also qualify for a one-time grant from Enterprise Singapore of up to S$9,000 per retailer over 6 months when they signed on. The grant can be used to subsidize content development, product listing, channel management, fulfilment, advertising and promotion, training and workshops to help local retailers enhance their eCommerce capabilities and reach more customers in Singapore.
It’s these global initiatives that are helping to drive Amazon’s substantial annual growth along with that of the SME’s who choose to come along for the ride. Suffice it to say Amazon also has a very good program to assist with start-ups, because that’s an entirely separate article on its own.
In conclusion, the global pandemic has wreaked havoc on the world economy, but many have found new life in online sales. Platforms like Amazon have been proving for the last decade that brick and mortar need not be the only channel, and for many, it need not be a channel at all. The future of business for SME’s lies with the adaptation of an online sales and marketing strategy, incorporating digital and social media to target market prospects…..just like Amazon.