Most small and medium-sized businesses aren’t selling their products online or exporting to other countries, keeping Canadian enterprises confined to local markets, a new survey says.
Only 37 per cent of Canadian small businesses currently operate on e-commerce platforms and nearly half face challenges navigating export and import processes, posing barriers to expanding into global markets, according to a study released Wednesday by FedEx Express Canada. With enterprises hesitating to go digital, it’s no surprise that they are also struggling to navigate international trade opportunities, said the president of the shipping and logistics company.
“Small and medium-sized businesses from the beginning need to get their goods and services online even just to start shipping domestically in Canada, and then get to work on selling globally,” Lisa Lisson said. “For companies to completely ignore these new markets will affect their ability to grow and remain competitive.”
Of 500 small-business managers surveyed for the 2019 FedEx Trade Index, which was conducted by market research company Morning Consult, more than half – 57 per cent – said that increasing trade between Canada and other countries will help their business. Even so, most of those companies said that significant barriers make it difficult to get their products into foreign markets.
Of those exporting and importing companies, 81 per cent said tariffs affect the growth of their businesses. Many of them cited issues with variations in fees, language barriers, unfamiliar trade terminology and differing customs regulations.
That accounts for a large population of Canadian businesses. Of the 1.3 million enterprises with employees across the country, 98 per cent employ fewer than 100 people, according to Statistics Canada.
Ms. Lisson said most small businesses lack the resources available to larger companies, such as hiring consultants and digital and international business specialists, to figure out how to pay for, build and maintain an online sales platform and work through complex trade procedures.
“Some of these small businesses are so focused on trying to keep their heads above water that they’re only focusing on their local customer base and making sure that they maintain controlled growth,” she said.
Many companies that would benefit from selling online avoid e-commerce because of the cost of launching a digital platform and shipping its products, according to the Canadian Federation of Independent Business, which represents 110,000 small and medium-sized companies. And when small businesses wade into international markets, they often risk incurring expensive, cumbersome setbacks.
Unexpected customs requirements, unpredictable regulation changes in other countries and varying import and export fees tend to arise without warning, said Corinne Pohlmann, CFIB’s senior vice-president of national affairs. Free-trade agreements such as the North American free-trade agreement and the new United States-Mexico-Canada Agreement – which 86 per cent of small businesses support, according to FedEx’s survey – often overlook logistical and day-to-day barriers, she said.
“There are just so many things that business owners have to know to be able to deal with borders and duties and it can be very complicated," Ms. Pohlmann said. "This is what discourages small businesses from even bothering.”
To avoid these risks, Carleton Place, Ont.-based Sam Bat, a maker of maple baseball bats, expects its sales managers to stay up to date on the trade regulations of the markets they oversee, which include the U.S., Mexico, Australia, Japan, South Korea and Taiwan, said president and co-owner Arlene Anderson. Rather than hire a trade consultant, the business also connects with sales and trade experts at shipping companies such as FedEx and works with dealers in other countries that speak both English and the local language and provide insight into the foreign market.
Even so, Sam Bats has incurred financial setbacks when exporting to other countries. Five years ago, it shipped a large order of small novelty bats to Australia using a new courier. In an error, the bats were processed at the price of full-sized bats, causing the business to receive a bill for $12,000 in additional fees. But Ms. Anderson said that, despite these types of risks, the company would not be able to grow without its international clients.
“We’ll ship a bat and find out if it’s a disaster,” she said. “There’s nothing like trial and error.”
Sam Bats has sold its baseball bats online since 2007 when it launched its first e-commerce platform – a costly endeavour that saw the site crash one year after launch. Twelve years later, maintaining its online sales website consumes a hefty portion of Sam Bat’s advertising budget, which accounts for about 15 per cent of its operating costs. But it’s a price tag that the baseball bat maker can’t afford to do without, Ms. Anderson said.
“We’re up against huge brands like Louisville Slugger and Rawlings so it’s extremely important that we look the part of being a high-end, custom product,” she said.