New research from the Federation of Small Businesses has revealed the scale of challenges facing firms that use online marketplaces such as Amazon, eBay and Facebook.
The FSB study has found that small firms are reliant on these online platforms to succeed but are dealing with a number of barriers to growth, especially when it comes to trading overseas.
One in five small firms that trade digitally sell their products via online marketplaces such as Amazon and Facebook. However, the FSB research has found that three of the biggest problems facing traders are fake reviews (21%), sudden changes to terms and conditions (19%) and infringement of intellectual property (13%).
Many SMEs use online platforms to expand their sales to new territories because they provide a cheaper way to reach overseas customers, as well as reducing risk, raising brand awareness and fostering consumer trust. Germany, France, Ireland, the United States and the Netherlands are the biggest markets for UK small firms that export. The top three digital platforms are eBay, Amazon and Facebook.
However, 38% of small firms polled told the FSB that local delivery problems for tangible goods is the top problem affecting their exports. Non-tariff barriers, such as local taxes and regulations, are the top barrier for exports when it comes to intangible goods and services.
"Digital trade is taking the UK small business community by storm. Businesses are using the online opportunities being offered to them to grow and expand their firms. But huge difficulties lie ahead," said FSB national chairman Mike Cherry.
"Crucial to small firms are websites like eBay, Amazon and Facebook who are central to advertising, sales and their exporting aims … At the moment, around 20% of current small business exporters and importers use online platforms to trade internationally, but this could expand hugely if the environment for them was improved."
The FSB is calling on the UK government to do more to support UK exporters. Cherry said: "It's vital that government both listens to small businesses about their exporting needs and considers them as part of any response to the ongoing digital trade revolution. Domestically, this means having access to fast and reliable broadband and mobile coverage across the country, but also requires upskilling employees' and business owners' digital skills.
"Internationally, this will require the government to push to remove barriers to digital trade encountered in overseas markets, such as data localisation measures and weak intellectual property protections, at both the WTO and in the government's future bilateral trade negotiations."
Written by Rachel Miller.