Jan 10, 2014 - 4:15pm

Cost of Trade on eBay Plummets, Helping Mom and Pop Shop Go Global


eBay sign at company headquarters.
eBay sign is displayed at company headquarters in San Jose, California. Photographer: Tony Avelar/Bloomberg.

Cross-posted from FreeEnterprise.com.

The iconic image of a small business as a mom-and-pop store selling its wares in a small town hardly resembles the Internet-fueled global trading that drives many lean operations today. Yet engaging in global trade can be challenging for small enterprises, says Brian Bieron, senior director of global public policy at eBay Inc.

In fact, less than 5% of small businesses in the U.S. and other developed markets like Western Europe actually engage in significant cross-border trade, he said. “And when they do, they tend to trade with customers in one or two countries. Usually those are businesses near a border or have some kind of established relationship with an out of the country businesses,” Bieron told FreeEnterprise.com.

One obstacle facing smaller exporters is the lack of cohesive customs and shipping procedures around the world, he said. That’s why the trade-facilitation agreement reached in December by member countries of the World Trade Organization is significant.

The deal inked in Bali, which would simplify and create uniform border procedures, serves as indication that trade officials recognize the importance of streamlining trade in a manner that boosts the level of small and medium size businesses that export, Bieron said.  Coupled with technological advancements, the agreement streamlines the logistics of trading, especially small shipments.

“The new agreement will provide increased transparency and access to customs documents, regulations and procedures, and will publicize other information required for small businesses to engage in trade,” the U.S Trade Representative's office said.

Still, there’s room for greater harmonization in trade policies — both at the national level and between countries, Bieron says. “When it comes to harmonization, you need countries to adopt policies and systems that easily integrate with the policies and systems of other countries to make packages move across the border much faster.”

eBay’s efforts to support small businesses show the potential impact that a streamlined export process can have. The cost of trade on eBay’s online marketplace fell by 41% between 2005 and 2009, three times faster than the decline in traditional trade, according to a recent analysisthe San Jose, CA-based company conducted with Sidley Austin LLP.

Bieron said eBay’s PayPal service is a prime example how to assist businesses, since it “reduces the cost of businesses and consumers connecting across the globe, it reduces the cost of search, and it establishes trust over long distances that have never been possible before.”

Yet the micro-business global trade occurring on eBay platforms is not limited to eBay or PayPal. “Our platform has offered data that shows that when very small businesses are using mobile technology and the Internet, they operate on the global level in a manner that really small businesses have never operated before,” he said.

Exporting has become so commonplace that businesses almost have to work to not export, Bieron said, noting that the Internet and mobile technology have created a business environment that makes exporting inevitable for businesses of all sizes.

study of small businesses in eight developing economies shows that more than 95% of the companies using eBay online marketplace export. “And they tend to export to 25 or more countries per year. In many cases, very small businesses with 10 or fewer employees,” said Bieron.

That’s one reason trade advocates are excited about the Bali agreement’s potential to tackle the shipping and customs hurdles that continue to hinder trade. As trade officials implement solutions that improve and expedite the flow of goods, Bieron expects that more small businesses will likely get involved in the global trade business.

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