While Small and Medium Enterprises (SME) in Cambodia could benefit from selling goods across borders, bottlenecks and constraints can make it an arduous process for many in the Kingdom.
At a panel discussion on e-commerce SME exports in Cambodia hosted by the European Chamber of Commerce and ARISE+ Cambodia, experts discussed the different opportunities and challenges facing SMEs making the digital leap in the Kingdom and beyond.
Logistics and shipping loom large as issues, as does a regulatory environment that is still in its development phase.
Sven Callebaut, an international trade advisor at the Ministry of Commerce, said logistics are a key issue because historically only bulk items are shipped across borders, whereas e-commerce shipments require flexibility to accommodate different sizes and types of goods.
“It’s quite difficult for Cambodian businesses to export overseas because of the lack of solutions for cross-border delivery so you have to think in terms of who is going to deliver the goods in the destination market, do you need a fulfillment center?” he said.
Among other challenges, he said there was a need to fulfill various import requirements of destination countries, a sometimes cumbersome process that requires, for example, strict conditions concerning perishable goods.
Efforts also need to be made to market products to international customers, and data privacy and cybersecurity laws must be taken into consideration.
Reverse logistics is an area of concern as well, and an unfortunate reality for e-commerce stores.
Callebaut said 30 percent of e-commerce goods sold in Europe are returned. He added that retuned items to Cambodia are treated as imports, a classification that compounds the complexity of issuing returns in a timely, cost-effective manner.
These factors can make exporting a difficult process for many Cambodian SMEs, which need human resources and capital to navigate customs processes, pricey shipping costs, and global digital marketing strategies.
Finding a way around pricey shipping
There are success stories in the country, however. Before the pandemic, Monika Nowaczyk founded Cambodia Knits, a social enterprise that employs those in marginalized communities to knit plush toy products. In 2020, she registered Beebee+Bongo in Singapore, an e-commerce site to sell these products. Her strategy worked and she’s found success in the US market.
One of the perks of incorporating the company in Singapore was the wealth of payment options available. Being able to use Paypal and Stripe, for example, increased customer trust in her site and allowed her to reach a wider market.
“The issue for companies registered here is that there is currently no option to use a global payment gateway, and only ABA can accept international payments,” Nowaczyk said.
Solving the shipping dilemma is another hurdle. As she illustrated during her presentation, shipping a “Sleepy Animal” plush toy to Singapore via DHL costs between $37 and $54. To ship to the US, the price was between $52 and $77 using DHL. The dolls cost between $18 and $25.
It was even cheaper to send products to Singapore via the US than directly from Cambodia to Singapore. An item sent from Cambodia to Singapore costs about $50, whereas the same item costs $10.45 to ship from the US to Singapore.
DHL provides one of the only shipping solutions for shipments overseas in the country, and the prices currently aren’t suitable for smaller companies shipping parcels or individual items.
Sim Sousachak, the area sales manager at DHL Express Cambodia, said the prices were partially a reflection of the global supply chain crunch due to the pandemic. During his presentation, he said that special discounts were available for registered e-commerce sites that signed onto the platform.
An option to sidestep the high shipping costs is using fulfillment centers, as Callebaut mentioned. Nowaczyk ships products in bulk to the US and stores them in a local DHL fulfillment center. When an order is placed, she ships from the center, a tactic that decreases her overall shipping costs.
Resources to help SMEs connect to the global marketplace
While it’s an uphill battle for SMEs trying to connect to the global marketplace – especially for those that relied on tourist foot traffic before the pandemic — there are plenty of initiatives currently offered to help build the ecosystem.
Go4Echam, for example, is a Ministry of Commerce project that aims to develop an entire e-commerce system to serve the country’s small businesses.
Callebaut said The Cambodia Trade marketplace, one of the key components of the initiative, will be launched domestically this month and internationally next month.
Among other benefits, the marketplace was created to host a wide variety of companies and support them by providing payment gateways and cross-border support.
It also provides a safe area to test regulations before they are officially implemented. “It’s kind of a closed-loop where you can test a number of new regulations, which if successful and impactful, can be expanded into the entire ecosystem,” Callebaut said.
Callebaut also said there were $4,000 grants provided by the UNDP available through a program to help small businesses crack the B2B marketplace. SMEs must be officially registered with the Ministry of Commerce and they must be interested in cross-border sales to be eligible for the program.
In addition, Callebaut mentioned a project by the Global Trade Alliance for Trade Facilitation being implemented by Swiss Contact in Cambodia that will help ease the customs processes in the country.
Working with Cambodia Post and the General Department of Customs and Excise, the project aims to link the electronic systems of the organizations to make trading small packages easier.
The overall goal of the project is to connect SMEs, particularly women-led enterprises, to the global marketplace.
Swiss Contact is also working with the Ministry of Commerce to implement the Alliance’s Small Package E-Trade for SMEs (SeT4SME) program. This project aims to integrate the Electronic Advanced Data (EAD) system into the GDCE and Cambodia Post.
The EAD system is the world-standard system used to approve imports and could ease the process of exporting for many SMEs.
Calleabaut said the SET4SME project should also help in consolidating smaller shipments into larger ones and could help bargain for lower rates with shipping companies like DHL and EMS.
Future SME discussions to be held
The panel discussion Thursday was the fifth of eight SME Export Talk forums organized by ARISE+ Cambodia (co-funded by the EU and German Development Agency, BMZ) and EuroCham.
Tom Hekseth, EuroCham’s deputy director, said that while there are several e-commerce platforms catering to the domestic market, the export market is currently underserved, and the events were geared to address this issue.
“With today’s event, we hope to have broken down some of the most complex barriers facing SMEs, such as search engine optimization, finding fulfillment service providers, and lowering logistics costs to enable Cambodian products to be competitive abroad,” he said.
The next talk will focus on certificates of origin in partnership with the MoC and will be held in June. Certificates of origin are a hot topic in the community after the recently implemented RCEP agreement changed their requirements, making it easier in some cases to export goods to other RCEP countries.