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The Future of SMEs in E-commerce is the Future of Turkey

Small and medium-sized enterprises (SMEs), which are numerous in number, unfortunately do not make a sufficient contribution to the economy. However, the performance of SMEs, especially in e-commerce, will positively affect Turkey’s domestic trade and exports.

General Situation of SMEs

According to TUIK data for 2021, SMEs (90.83% micro, 7.54% small, 1.32% medium-sized), which employ 65% of total wage earners and constitute 99.7% of total enterprises, unfortunately account for 46% of total turnover, 37% of total production value and 35% of total value added at factor cost.

According to the Turkey E-commerce Ecosystem (2022) report prepared by İyzico, while the share of e-commerce in GDP is 5.7% globally, this share for Turkey is 3.8% in 2018, 4.4% in 2019, 4.9% in 2020, 5.7% in 2021 and 6% in 2022. According to this report, the share of total retail e-commerce in total retail sales at the global level is 22% in 2022, while for Turkey, this share is 5.4% in 2018, 6.4% in 2019, 11.3% in 2020, 13.7% in 2021 and 16.5% in 2022. According to the “E-Commerce Outlook for SMEs in Turkey (May 2023)” report prepared by PwC and Amazon, this share could be 25% in 2025.

According to the Turkey E-commerce Ecosystem report, 94.2%, 3.9%, 1.7%, 1.7%, and 0.2% of total e-commerce sellers are micro, small, medium, and large enterprises, respectively,4%, 4.3%, 16.9% and 75.4% of the increase in sales volume (TL) belongs to micro, small, medium and large enterprises with 15.6%, 74.8%, 82.8% and 156.6%, respectively. Since the share of large-scale enterprises in the total number of transactions is small, I estimate that the increase in sales volume is due to the increase in “price” rather than the increase in “number of transactions”, and for the others, the increase is due to the increase in “number of transactions”.

According to TUIK data for 2021, only 2.8% of total enterprises in Turkey can “export”. Of these “exporting” enterprises, 94.2% are SMEs (42.2% micro, 37.2% small, 14.9% medium-sized). SMEs account for 30% of total exports (USD) (36% in 2013). On the other hand, 1.3% of total micro enterprises, 13.8% of total small enterprises, 31.5% of total medium enterprises and 51.4% of total large enterprises can “export”. Approximately 60% of exports by SMEs are in the trade sector and 35% in the industrial sector.

According to the E-Commerce Outlook of SMEs in Turkey report, 38% of SMEs state that the share of e-export activities in total exports is %05-%, while 59% of SMEs state that this share is %25-%and 3% state that this share is 50-100%.

Problems of SMEs

According to https://www.aboutamazon.eu/news/empowering-small-business, 73% of European SMEs state that they need to be provided with the right “logistics” solutions and the right “logistics” information in order to be able to do e-commerce and to develop their existing e-commerce. I estimate that this is a much higher percentage for Turkey, although unfortunately there is no data like this.

According to the E-Commerce Outlook for SMEs in Turkey (May 2023) report by PwC and Amazon, 55% of SMEs say they do not e-export due to lack of knowledge about e-export and 30% say they do not e-export due to both the lack of advanced logistics facilities at marketplace operators and the slowness and difficulty of logistics services. The key logistics-related problems they cite are, for example, delivery delays, customs clearance and product returns.

According to the E-Commerce Outlook of SMEs in Turkey report, 76.8% of SMEs have no knowledge about e-export. According to the same report, 25.3% of SMEs make e-commerce sales, while 4.1% of SMEs are e-exporters (40% of SMEs in Europe are e-exporters). Although the rate of e-exporters is low, it can be said that there is significant potential. On the other hand, e-commerce is growing fast in Turkey, but it should be questioned why e-commerce companies are unable to utilize their trade knowledge and experience in e-export.

E-commerce May Lower Inflation

According to https://www.aboutamazon.eu/news/empowering-small-business, in Italy, for example, online prices were much more stable even during periods of high inflation, and inflation could have been on average 5 percent higher in the last six years than in 2023 without the impact of the expansion of e-commerce. Maintaining affordable prices due to online competition and being able to offer a wide range of products through fast delivery are measures that help fight inflation. By facilitating faster access to lower prices and greater availability, variety and range of products offered, e-commerce has prevented prices from growing too much through the competitive effect on conventional trade.

In Italy, when prices increase by “one” percentage point, e-commerce reduces the resulting inflation by “-0.02” percentage points, thus preventing inflation in Italy from growing further despite the increase in consumption. If there had been no such offset against the price increase in conventional sales thanks to the spread of e-commerce, inflation in Italy would have been on average 5 percent higher in the last six years than in 2023.

E-commerce Can Help SMEs Trade More and Export More

According to the E-Commerce Outlook of SMEs in Turkey report, 18.7% of SMEs plan to make e-commerce sales soon and 7.3% plan to e-export soon. Furthermore, 35% of e-exporting SMEs believe that their e-export sales will increase in the coming period.

The Right Logistics Structure is Necessary for E-commerce

According to the Turkey E-commerce Ecosystem report, logistics movement, transportation and warehousing, is mandatory for approximately 4 billion transactions, excluding “services, tourism, travel”, which is 20% of total e-commerce transactions. This logistics movement is especially necessary for fashion, accessories, electronics, technology, furniture, glassware and haberdashery products, which are most commonly sold in e-commerce by SMEs.

E-commerce, supported by the right logistics solutions, enables SMEs to reach and sell products to a large number of customers. What is important here is that the right logistics solutions are offered for e-commerce. Thanks to e-commerce supported by the right logistics solutions, SMEs can sell their products to any point in Turkey at any time and can also e-export their products to any point in the world.

The growth of e-commerce and the development of e-commerce will lead to the improvement of logistics activities for e-commerce and even the development of new logistics solutions that are not being implemented today.

E-commerce Ensures Doing Business Right and Thriving

SMEs that e-export to countries such as the US and the EU, where quality awareness is high and standardization is important, both improve themselves and contribute to the development of quality awareness and standardization understanding of the sectors they interact with.

In addition to providing economic benefits to SMEs, e-commerce also contributes to the development of the sectors with which SMEs interact and thus to socioeconomic development.

Just as important as providing the right logistics solutions is raising their level of logistics knowledge and thus making them logistically literate. Increasing the level of logistics knowledge will enable SMEs to understand how correct or incorrect logistics solutions are, in other words, to become logistically literate. Logistically literate SMEs will be able to question the logistics solutions offered to them.

The growth of e-commerce in Turkey will lead to the growth of e-commerce sectors. Thus, the growth of e-commerce will lead to the growth of trade in Turkey.

If more SMEs engage in e-commerce and e-export, e-commerce, and therefore trade in Turkey and the sectors that interact with e-commerce, will flourish.

According to https://www.aboutamazon.eu/news/empowering-small-business, for example, it shows that for every €100 invested in the e-commerce and digital retail supply chain in Italy, an additional €148 is created in the extended supply chain, including indirect and induced effects. This evidence shows how digital commerce represents the leading growth multiplier for the Italian economy.

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