Thailand: The e-commerce advantage

• Jul 27, 2022

The Covid-19 pandemic had a profound impact on businesses of all sizes, but micro, small and medium enterprises (MSMEs) that took advantage of e-commerce opportunities generally fared better than their peers that did not, a new study by Alibaba.com has found.

The global e-commerce platform and its AliResearch Institute set out to look at how MSMEs met the challenges of the pandemic and to learn how some of the lessons learned can be applied in the post-pandemic era. Among its key findings:

• MSMEs are critical to the global economy, comprising 90% of businesses and contributing more than 70% of global employment and 50-60% of GDP.
• MSMEs were hit hard by the pandemic, with micro-businesses suffering disproportionately: up to 70% of global MSMEs saw sales decline with two-thirds reporting their sales dropped by 40%.
• MSMEs’ offline business was severely disrupted by lack of demand while online sales skyrocketed; digitisation is an effective way for MSMEs to risk-proof their business: the survival rate of MSMEs was 7 percentage points higher in the regions with the highest e-commerce penetration than in those with the lowest.

The study found that, of all MSMEs, the pandemic took the largest toll on smaller ones. This was to be expected since many smaller businesses did not have the resources or infrastructure to roll with the punches of repeated shutdowns, local restrictions, shortages and other issues caused by the pandemic.

Less than a quarter of MSMEs escaped the negative effects of the pandemic, with only 23.5% of them not suffering from a decline in sales. Two-thirds of MSMEs saw their business drop by 40%.

In Southeast Asia, MSMEs account for 97% of all businesses and employ 67% of the working population. For some countries, the outlook for business continuation was grim if lockdowns persisted — 49% of respondents in Indonesia, 52% in Thailand and 61% in the Philippines indicated they expected to shut down if restrictions weren’t lifted soon. Some 90% of MSMEs in Thailand anticipated a huge loss of revenue.

KEYS TO RECOVERY

“We have to recognise that MSMEs are not only critical economic players but their health and prosperity are also critical to a full and sustainable global economic recovery,” said Hongbin Gao, head of the AliResearch Institute.

“Consequently, we have released this report to help return MSMEs to the centre stage and facilitate broader and more practical discussions about supporting MSMEs and equipping them for greater economic impact.”

Digital transformation has proven to be a lifeline to many MSMEs during the pandemic, by reducing their costs, providing timely access to information, optimising workflows, and helping them expand into new markets.

In Thailand, about 40% of MSMEs surveyed said they hoped that platform companies like Alibaba could offer favourable policies to improve their operational efficiency. Second on their wish list, mentioned by 30% of respondents, was new export stimulus from governments of public bodies.

Unsurprisingly, the research revealed that the survival rate of MSMEs was 7 percentage points higher in the regions with the highest e-commerce penetration than in those with the lowest. In addition, the economic downturn was less severe in regions with higher e-commerce penetration rates.

“The pandemic has changed global trade forever. There is no denying that businesses and individuals have suffered tremendously. However, the creativity and ingenuity that MSMEs have put into action to overcome the many hurdles created by the pandemic has been nothing short of impressive,” said Andrew Zheng, vice-president of Alibaba.com.

“E-commerce may have served as a survival mechanism throughout the pandemic, but moving forward, it will remain a valuable tool for global trade. Social selling, live commerce, virtual trade shows, and request for quotation [RFQ] marketplaces allow sellers to get creative in how they reach their audiences and make it easier for them to connect with their ideal clients.

“Through digitisation, MSMEs can also easily access insights related to internet traffic, demand forecasting and other key analytics that empower them to make better decisions for their businesses.”

However, the report also revealed a significant gap in the adoption of digital strategies between smaller and larger enterprises. Smaller enterprises were found to have lower adoption of sophisticated digital technologies and tended to digitise only general administration and marketing functions. Many tended to neglect other aspects including enterprise resource planning, customer relationship management and big data.