Why E-Commerce Giants Must Look Out For SMEs

According to a JD press release, JD launched its Spark economic support plan for SMEs, stall owners, and shopkeepers on June 2. The plan consists of three priorities: ensuring supply, assisting operations, and fostering employment. Under this plan, JD.com will select 50 billion quality goods and provide each small shop with a 100,000-yuan, interest-free credit for purchases. According to initial estimates, this support will be a lifesaving effort for millions of convenience stores and stalls, and it will ensure that 5 million people keep their jobs. Most of China’s small and medium-sized businesses have been hit hard by the pandemic and its related restrictions. A survey conducted in early February by the Enterprise Survey for Innovation and Entrepreneurship in China (ESIEC) team and led by Peking University showed that 14 percent of the 2,349 surveyed SMEs couldn't last longer than a month on cash flow and that 50 percent couldn’t last beyond three months. In short, many SMEs need to overcome serious difficulties to survive, and their failures would surely have a devastating effect on China’s economy. That’s because, according to The International Food Policy Research Institute, SMEs currently account for 90 percent of China’s employment, generate 80 percent of its exports, and account for 70 percent of the country's GDP. But Lei Xu, the CEO of JD Retail, stated that JD already has experience in assisting the “stall economy” and that this plan is a continuation of past efforts. JD understands the impact of the crisis on stalls and SMEs, and it is encouraging these businesses to adopt digital innovations and new technologies. “JD has both the ability and the responsibility to use digitization to support and make the economy of small stalls and shops more dynamic, helping to further invigorate the overall economy and stabilize employment,” Lei Xu said. Alibaba launched its own program to assist export-focused SMEs and help them combat the outcomes of the COVID-19 crisis. Through its 2020 Spring Thunder Initiative, Alibaba will use its technological and commercial capabilities to design new supply chains, create demand, and promote trade. And, according to the Chinese giant, they are prepared to take “every necessary action” to assist SMEs. “We must band together with the SMEs that need the most help, and convert Alibaba’s resources into strength for the SMEs,” said Alibaba Group Chairman and CEO, Daniel Zhang in a staff memo. “We must turn the ‘danger’ brought about by the pandemic into ‘opportunity’ for SMEs to prepare for the future through digital transformation. Now is the time for Alibaba to give back to our community and to give back to our SMEs.” It’s important to note that Alibaba was a trusted ally for SMEs even during the 2008 financial crisis when the e-commerce giant launched three assistance programs. Thanks to Dark Cloud, Wild Winds, and Spring Thunder, 40 million SMEs were assisted in their rehabilitation efforts. Major players like Alibaba and JD.com understand that the country cannot stabilize its market and reboot the economy without a strong strategy for SME recovery, so why isn’t this Alibaba/JD effect being replicated in the West? Mainly because of cultural values and the clash between collectivism and individualism. Even in today’s modern China, a Confucian ethos prevails, and the national culture encourages that brand of collectivism. But the dominant culture in the West is an individualistic ideology, and Western capitalism has enabled a form of materialism that pushes individuals to opt for financial success and material possessions over altruism, justice, and charity. Amazon has long been accused of “squeezing” small businesses or “pushing them out of the market,” and various sellers have complained about poor treatment and policies that favor the buyer without protection against copycats. Moreover, the handling of the COVID-19 crisis and the possible violation of the Occupational Safety and Health Act (OSHA) that concerned even the New York Attorney General's office, shows that Amazon isn’t even prioritizing its own employees. Conversely, Alibaba has taken a different approach to stakeholders and success. In a 2014 CNBC interview, Jack Ma explained the group’s commitment to all shareholders, saying, “Today, what we’ve got is not money. What we’ve got is the trust of the people. With millions of small businesses and so many shareholders, I am very honored and so excited because when I see them, the responsibility I think about for the next five to ten years is how I can make sure these shareholders are happy,” Ma said. In 2017, on the show “The Brave Ones,” he said that three things shouldn’t be touched: money, power, and glory. “If you keep the power in your office, you will be in trouble. If you keep the money in your own pocket, you will be in trouble. If you put the glory in your hand, you will be in trouble,” he explained. “So when you have the money, spend the money supporting more people. When you are in power, empower the others. When you get the glory, (make sure) the other people have that. Then you will be happy.” In the same interview, Ma warned that the age of large businesses is ending and that smaller companies will take center stage over the next century, which is why Ma has dedicated his efforts to empowering SMEs. In fact, in a September 5, 2014 filing with the Securities and Exchange Commission (Washington, D.C. 20549), it states that Alibaba’s founders started the company “to champion small businesses” and the group’s decisions have been driven by a long-term mission and “not by the pursuit of short-term gains.” That completely contradicts the “for-profit and growth” capitalist model promoted in the West (although even big Western companies like Amazon have recently been reevaluating their ideologies in a quest for more ethical virtues). Considering that younger consumers are demanding meaning and purpose from businesses, this shift in priorities is hardly surprising. Businesses are being challenged to look beyond profits and revenue to address socioeconomic issues and environmental challenges. The COVID-19 pandemic has changed the world permanently and has taught us that everyone has a responsibility in society, including big business. As such, empowering SMEs can be a game-changer for e-commerce giants like Amazon because it allows them to reinvent themselves as purpose-driven brands. In the end, humanistic or “compassionate” capitalism is the only way forward — not only for corporations but also for national economies.

Sectors

Insights

Company

Why E-Commerce Giants Must Look Out For SMEs