The New Faces of Transpacific Trade 2016
Recommendations
How governments can support global startups and small businesses
The entrepreneurs in this report reinforced the importance of maintaining a suite of public policies to support the seamless cross-border flow of lawful goods, data and payments, transportation and effective intellectual property and regulatory frameworks to enable their global success.
In order to support the global journeys of innovators like the ones profiled in this report, governments should:
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- Accelerate efforts to simplify trade, modernize customs processes and improve physical connectivity around trade lanes, which would have a disproportionately large benefit for startups and small businesses.
- Enhance access to the Internet, payments mechanisms and delivery services—the critical infrastructure that allows entrepreneurs to innovate and sell across borders and help overcome local distribution and partnership issues.
- Maintain effective intellectual property frameworks and help entrepreneurs understand how to avail themselves of low-cost tools to protect their innovations on a global basis.
- Consider how to simplify regulations and make them as transparent as possible, and take steps to facilitate the ability of startups and small businesses to understand and comply.
- Increase outreach to startups and small businesses and the associations, incubators and community groups that support them in order to understand their global challenges and improve awareness of the government resources and initiatives that may benefit them.
Introduction
For many entrepreneurs in the Asia Pacific, going global is a given, not a choice.
Enabled by the Internet, technology and government policies, entrepreneurs are creating businesses with a global footprint. With just a few employees and a website or app, small businesses can meet consumer needs and innovate in ways that were not possible even a decade ago.
Economies across the Asia Pacific are creating the conditions to permit even very small companies to decentralize staffs, find manufacturing and engineering partners, establish their own micro-global supply chains and export to the region and beyond.
Some countries are working to level the playing field to enable businesses, workers and citizens to compete effectively in the global marketplace by lowering tariffs, increasing transparency of regulations and improving the infrastructure and policies that permit global shipping, transactions and commerce.
One major initiative that is poised to enable the global journeys of startups and small businesses is the Transpacific Partnership, an agreement by 12 countries to lower barriers and facilitate global trade and investment in the region.
The agreement includes provisions to lower tariffs, improve transparency, reduce frictions associated with shipping and customs, improve access to the global digital economy, establish more effective intellectual property regimes and create a mechanism to address the concerns of small businesses.
This report profiles entrepreneurs from each of the countries involved in the TPP agreement, who are tapping into the global marketplace, to elevate their global stories, understand the challenges they face and investigate how public policy can help them succeed.
Some are part of a new generation of startups that are being born global in the Asia Pacific.
For example, Skin Inc, a startup skincare line with headquarters in Singapore, has a design team in the United States, manufacturing in Japan and sales in over 100 cities around the world.
Others run more established small businesses which are also finding reasons to take their brands global.
Rick Brink, CEO of Weddingstar, a Canadian company which originally focused on the domestic market when it was founded more than three decades ago, observed that, “competitors coming into Canada made us realize that we have to go after the other markets also.”
Global markets can be particularly important for suppliers of niche products, like NB Products, a Seattle-based company that improves quality-of-life for ostomates around the world. And Gregory Dajer, CEO of MTTS Asia, a manufacturer of pediatric medical devices based in Vietnam, noted, “We’re a very niche market selling in small volumes. Without grasping bigger markets, it’s impossible to be sustainable.”
The stories in this report help illustrate the larger phenomenon taking place across the Asia Pacific—the emergence of micro and small enterprises as effective global players.
Over 98 percent of commercial sellers from ASEAN countries on eBay’s e-commerce platform exported everything from clothing, auto parts and beauty products to toys, industrial equipment and computer products in 2014. eBay sellers based in APEC economies reached an average of 36 markets in 2013.
PayPal points out that Asia has been an early adopter of technologies, such as e-payments, that facilitate the entry of small and new firms into the global marketplace. Fifty million users in the region adopted mobile app banking in only three years, while it took 14 years for the same number of people to utilize ATMs.
In Australia, a recent survey on the startup ecosystem found that 38 percent of local startups had export revenue. Of these, roughly one-third derived 60 percent or more of their revenue from exports.
Jodie Fox, cofounder of Australian startup Shoes of Prey, said that 70 percent of her company’s revenue comes from international markets. The company, which maintains offices in Australia, the Philippines and the United States and manufactures in China, was born digital and global—a common theme among the entrepreneurs surveyed.
“We started in Australia and it will always be a part of who we are,” said Fox. “But we’re a global brand.”
Common Challenges
Tapping into the global marketplace can bring a steep learning curve and new challenges, which startups and small businesses often have to tackle with limited resources. Several common challenges emerged from these global entrepreneurs:
Obstacles at the Border
“The biggest pain points for us have been tariffs and duties on certain products and the amount of paperwork needed to get across the border.” – Rick Brink, Weddingstar
“Even if the customer pays the return shipping, the paperwork and obstacles at the border are not worth the hassle on either end.” – Rebecca Germain, Midwest Scrapbook
“Sometimes we put a robot in the wrong [customs] category and the customer was taxed a lot. When we asked customs, even the customs agent didn’t know what to write down.” – Dr. Che Fai Yeong, DF Automation
Protection of Inventions and Designs
“We know there are probably people buying knock-offs but we want to connect our product with purpose. And if you’re just trying to buy a cheap cup, you’re probably not the right person for us anyway.” – Abigail Forsyth, KeepCup
“We had smoking-gun evidence that another company had hacked into our website and stolen our code. But, we chose not to take legal action. We said, ‘we’re going to out-innovate them instead.’ And we did. They no longer exist.” – Jodie Fox, Shoes of Prey
“There was one movie theater chain that copied our whole system. But for us being a startup, going into any kind of legal action or litigation would have been a waste of resources. We just focused on building a good service.” – Gary Urteaga, CinePapaya
Regulatory Challenges
“Being from Singapore, it wasn’t within my expectations that certain countries would take so long to review documents. It’s not always clear what documents they even require.” – Sabrina Tan, Skin Inc
“The FDA required so much documentation, even for very small things. We had to do everything from zero. That was a big surprise.” – Satoshi Sugie, WHILL
Financing
“Even if we were a Vietnamese startup, we would have incorporated our company in Singapore, because that’s where investors are comfortable putting their money.” – Vu Van, ELSA
“At one point, we almost gave up. But when we looked at all the interest from people saying ‘I want to be a Triip creator,’ I thought, ‘People need us.’ So, that’s the moment we decided to sell our house.” – Hai Ho, Triip.me
“It would be easier to expand if there were other means out there: venture capital and things like that. It’s not really clear how to get that.”– Raifana Ranie, Rai Ranie
Local Distribution & Partnership
“[In the UK,] I’m limited to the customer base and resources [of my current distributor].” – Michelyn Caldwell, NB Products
“Our distributors are usually local companies that have already established a presence. Sometimes in Africa it was so difficult to find such companies, so we’re working with startups or doctors who want to represent us.” – Gregory Dajer, MTTS Asia
“Going direct to consumers and showing that there was a market there and getting international press got us in front of distributors.” – Kavita Shukla, the FRESHGLOW Co.
Common Solution: Technology
While the companies we spoke with shared a number of common challenges, they also shared one common approach to building their businesses: the use of digital platforms and services to operate their businesses on a global basis. Here is what they said about their favorite tools:
- “The vast majority of software we use is Google Enterprise software.”
- “Our solution depends on data sources streamed from other apps, like Google Analytics, Facebook and Twitter.”
- “UPS has really held our hand through the shipping global process.”
- “We use QuickBooks for accounting and Fishbowl.”
- “Paypal, Stripe and eBay have been the main technology platforms that we use.”
- “We are slowly migrating to Google Hangouts.”
- “We use Dropbox all the time.”
- “We implemented Slack in the business and it’s been awesome.”