UNITED STATES SMALL ONLINE BUSINESS GROWTH REPORT

Transcription

1 UNITED STATES SMALL ONLINE BUSINESS GROWTH REPORT April 2

2 CONTENTS US STATE ABBREVIATIONS 4 INTRODUCTION 5 MAKING THE WORLD SMALLER FOR SMALL ENTERPRISES EBAY SMALL BUSINESSES ACROSS AMERICA EXPORT TO THE WORLD SHARE OF EBAY-ENABLED SMES EXPORTING SHARE OF EBAY-ENABLED SMES THAT REACH TEN OR MORE DIFFERENT FOREIGN DESTINATION MARKETS 1 AVERAGE NUMBER OF FOREIGN DESTINATION MARKETS 11 SHARE OF EBAY-ENABLED SMES EXPORTING TO BUYERS ON FOUR OR MORE CONTINENTS 12 SHARE OF EBAY-ENABLED SMES EXPORTING TO TRANS-PACIFIC PARTNERSHIP COUNTRIES 12 SHARE OF EBAY-ENABLED SME EXPORTS TO TRANS-PACIFIC PARTNERSHIP COUNTRIES 1 TRANSLATING TRADE SUCCESS TO GROWTH PERFORMANCE: EBAY COMMERCIAL SELLER PERFORMANCE IN THE UNITED STATES AVERAGE ANNUAL GROWTH IN THE NUMBER OF EBAY COMMERCIAL SELLERS 14 EBAY CONTINUOUS COMMERCIAL SELLERS 15 NEWCOMERS DIGITAL DENSITY COUNTY LEVEL EBAY SMALL BUSINESS ACTIVITY ANALYSIS 1 POLICY RECOMMENDATIONS 2 APPENDIX A: CHARTS, METHODOLOGY, AND SOURCES APPENDIX B: DIGITAL DENSITY TOP 1 COUNTIES

3 US STATE ABBREVIATIONS AL Alabama MT Montana AK Alaska NE Nebraska AZ Arizona NV Nevada AR Arkansas NH New Hampshire CA California NJ New Jersey CO Colorado NM New Mexico CT Connecticut NY New York DC District of Columbia NC North Carolina DE Delaware ND North Dakota FL Florida OH Ohio GA Georgia OK Oklahoma HI Hawaii OR Oregon ID Idaho PA Pennsylvania IL Illinois RI Rhode Island IN Indiana SC South Carolina IA Iowa SD South Dakota KS Kansas TN Tennessee KY Kentucky TX Texas LA Louisiana UT Utah ME Maine VT Vermont MD Maryland VA Virginia MA Massachusetts WA Washington MI Michigan WV West Virginia MN Minnesota WI Wisconsin MS Mississippi WY Wyoming MO Missouri

4 INTRODUCTION In recent years, technology has ensured more equal economic opportunities for Small and Medium-sized Enterprises (SMEs). 1 Since 211, the ebay Public Policy Lab and a team of economists at Sidley Austin LLP have been working together to examine, measure and report on how globalization and technology are liberating the ambitions of SMEs. This report presents new findings coming out of this collaboration, exploring what is nothing short of a global commerce revolution that is being powered by Internet-enabled small businesses and entrepreneurs across America. The analysis delves further than ever before on a state-bystate basis to reveal a remarkably broad and balanced, if not completely equal, spread of ebay-enabled commerce across the country. Along with further confirmation of the unprecedented exporting success of micro and small businesses using ebay, the report shows that the overall economic activity of small online enterprises using the ebay platform has generally exceeded the average level of economic growth in each state. In addition, Sidley economists have measured the Digital Density of every county in each state, assessing the number of small businesses on ebay alongside their location and volume of sales. The top counties based on ebay selling small business activity per capita have been calculated for each state and are available at The analysis carried out by Sidley Austin for this report is based on a study of data covering transactions on the ebay Marketplace from 21 to 214. Sidley economists then looked at which sellers are registered to addresses in the United States. To ensure that the community of small online businesses on ebay was fully captured, the data was limited to transactions by sellers with $1, USD or more in sales annually on the ebay Marketplace. These are called Commercial Sellers or ebay-enabled SMEs. The research results show that technology is opening up tremendous opportunities for SMEs in every state. Technology is reducing barriers to global markets by allowing SMEs access to services that were once limited to large firms, such as smart shipping, international payments and translation services. An overwhelming of ebay SMEs in the United States export far higher than small businesses that have not embraced online commerce and they reach on average 1 different countries annually. This phenomenon of dramatically expanded global exporting activity by small and micro businesses has surfaced in every state regardless of region. ebay Commercial Sellers across America are effectively Small Global Traders. Thanks to technology, successful small businesses are not tied to any particular geography. ABOUT THE EBAY PUBLIC POLICY LAB The ebay Public Policy Lab seeks to address the public policy challenges that lie at the nexus of technology and commerce. We conduct innovative research using unique data analytics methodologies and creative insights. We seek to inspire debate at the highest levels of public policy discourse about the future of commerce and how technology can be leveraged to achieve the best possible outcomes for all. Brian Bieron Executive Director Hanne Melin Director Global Public Policy Alan Elias Senior Manager Global Public Policy 1 Although there is no single standard, SMEs are generally considered to be firms of less than 5 employees, although a standard of 25 employees in not uncommon. A subcategory of micro enterprises is also commonly used, often representing firms with fewer than 1 employees, although again ranges vary but generally fall below 2 employees. 4

5 The research results presented in this report paint a picture of a much more inclusive model of exporting, with a large number of Internetenabled SMEs from across every state participating at rates that far exceed traditional business models. And just as importantly, the corresponding economic growth rates likewise exceed, state-by-state, traditional economy averages. The report does not just rely on ebay data but contrasts research findings from the ebay Marketplace with traditional trade data publicly available elsewhere in particular US Census Bureau and Bureau of Economic Analysis data and surveys. As in previous reports, the ebay Marketplace provides the illustration of a new model for trade that is emerging, one that increases the prospects for more broad-based growth. Due to the presentation challenges related to providing accessible charts with data on all 5 states and the District of Columbia in the body of this report, one state from each of the eight regions employed by the United States Bureau of Economic Analysis 2 is included in the charts in the main body of the report. Charts with appropriate data for every state is included for each reported data point in Appendix A. In addition, to compare the results of the state-level analysis in this report with all 1 countries in the ebay Small Online Business Global Growth Report, please visit: global-report_vf_no-countries_.pdf MAKING THE WORLD SMALLER FOR SMALL ENTERPRISES The prototypical model for trade has involved a large and established domestic company targeting an export market, establishing overseas operations and eventually developing a multi-national supply chain with vendors and consumers located around the world. This model continues to be the dominant model for trade. Large firms account for less than 1 of enterprises in the United States, but their share of total exports is reported at Oregon Laminations Company Kyle Reznick PORTLAND, OR Kyle Reznick s father, Russ Hescock, opened Oregon Laminations in 14, and for many years was the largest provider of lamination services in the northwestern U.S. When the 2 recession hit, business was scarce and Russ had to find a solution quickly. Keeping the doors of Oregon Laminations open was not only about staying in business for their family, but it was also about the security of their employees families, who had been with the company for over 25 years. Russ turned to ebay as the answer and began selling lamination equipment and supplies online. Russ son Kyle has since taken over the business which has continued to grow, operating a brick and mortar location along with a substantial online business. The Internet not only provided the business with an opportunity to stay afloat, but has allowed the business to grow and expand to an international audience. Oregon Laminations exports 1 of its products. Many smaller firms do engage in exporting, often as a participant in a Global Value Chain (GVC). GVCs are a fundamental concept in global trade and development economics, providing insight into the interrelationship between large Multinational Enterprises (MNEs), affiliates and independent suppliers, many of which are often SMEs. 5 2 The Bureau of Economic Analysis, housed within the US Department of Commerce, divides the country into eight regions for the purposes of collecting and analyzing data, available at Search Regions. The regions are based on similarities that exist across the states with regard to a number of socioeconomic characteristics. The list of the states in each region is available at What Companies Want from the World Trading System, SMEs in International Trade: The View from Developing Countries. 4 US Census Bureau, 215, A Profile of U.S. Importing and Exporting Companies, Available at 5 Gereffi, Gary, John Humphrey, and Timothy Sturgeon. 25. The Governance of Global Value Chains. Review of International Political Economy 12 (1): 14. Available at 5

6 While large MNEs organize most GVCs and tend to be the leading actors in the value chains 6, SMEs are often intermediary suppliers to GVCs; this is one of the principal and increasingly well-studied methods of SME participation in trade. For example, Slaughter (21) finds that the typical US MNE buys more than $ billion USD in inputs from more than 6, US SMEs. Despite the emergence and evolution of GVCs, the share of traditional businesses, in particular SMEs, that export, remains relatively small. In the United States, approximately 1 of traditional businesses export. A new model of exporting and SME global commerce is emerging in parallel to the GVC model. It is driven by the Internet, a truly global digital network. When the Internet is combined with commercial services and efficient logistics, small businesses can connect with consumers and establish trust across national and cultural borders. Small businesses are able to create a storefront online and compete in global markets through e-commerce platforms with vibrant customer bases. Figure Most Trade Costs Matter More Offline Than Online 6 See Mayer, Thierry and Ottaviano, Gianmarco. 2. The Happy Few: The Internationalisation of European Firms; New Facts Based on Firm-Level Evidence. Brussels, Belgium: Bruegel Blueprint Series; Bernard Andrew B., J. Bradford Jensen, Stephen J. Redding and Peter K. Schott. 2. Firms in International Trade, Journal of Economic Perspectives, American Economic Association, vol. 21(), pp. 15-1, Summer; and Cebeci, Tolga, Ana M. Fernandes, Caroline Freund, and Martha Denisse Pierola Exporter dynamics database, Policy Research Working Paper Series 622, The World Bank, Washington, D.C. Slaughter, Matthew J. 21. American Companies and Global Supply Networks - Driving U.S. Economic Growth and Jobs by Connecting with the World. Available at Source for total number of companies that have at least one employee in addition to the owner (21): US Census Bureau, Business Dynamics Statistics,Longitudinal Business Database Source for total number of companies that have no employees (21): US Census Bureau, Nonemployer Statistics, Source for total number of exporting companies (21) US Census Exporter database Share = (total number of exporters)/((number of employing companies)+(number of non-employing companies)) Meltzer, Joshua Supporting the Internet as a Platform for International Trade. The Brookings Institute. Available at 1 Olarreaga, Marcelo, and Sidley Austin LLP Enabling Traders to Enter and Grow on the Global Stage. Page 12. Available at 6

7 Figure 1.1, which was developed by Olarreaga (212) as part of an initial study of the trade activity of ebay-enabled SMEs, represents the various factors studied as part of a distance analysis of trade on the ebay platform. The transaction costs studied included traditional trade costs such as shipping costs and absence of a common language, as well as a range of traditional institutional differences between countries. The analysis determined that all the traditional trade costs and institutional factors, with the two exceptions of shipping costs and no common language, matter less for ebay-based trade than they do for offline trade. However, shipping costs and the lack of common language between buyer and seller are two barriers to cross border commerce impacting online businesses, especially small online businesses. We have coined the term Global Empowerment Network to describe this model. The efficiencies created by these technology-based platform services have significantly reduced the cost of SME exporting and the rate of exporting by SMEs using the platforms has consequently increased dramatically. The four building blocks of the Global Empowerment Network: 1) Connectivity to the global Internet at low cost and without gatekeepers. 2) Global platform-based marketing, marketplace and payment services. ) Efficient, modern and connected package-level logistics and delivery services. Great Sky Gifts Colleen Rast KALISPELL, MT In 21 Colleen s husband, Jeff, got a job in Montana and their family relocated from the Philadelphia. Colleen had difficulty finding a job in her field of Project Management, so she began selling items on ebay. What started as a hobby quickly grew into a small business. Then Jeff s company closed, so the couple decided to take Great Sky Gifts Inc. to the next level. Adding more manpower was the right move and the business grew tremendously. The couple specializes in selling new premium brand apparel, antiques, collectibles, replacement dishware, locally made gifts and gourmet foods. Great Sky Gifts provides jobs for four people in the Flathead Valley and Colleen and Jeff mentor mom and pop businesses to show them how an Internet presence can increase their profits by reaching customers across the U.S. and globally. Great Sky Gifts exports around 2 of their products to 1 countries around the world. 4) Legal, regulatory and public policy framework supporting direct SME-to-consumer global commerce. The next section will use the findings from the ebay Marketplaces data to illustrate the level of export activity by ebay-enabled SMEs in states across America, and contrast the data with traditional business activity where available.

8 EBAY SMALL BUSINESSES ACROSS AMERICA EXPORT TO THE WORLD SHARE OF EBAY-ENABLED SMES EXPORTING The share of SMEs exporting on the ebay Marketplace is the first and consistently most striking data point in contrast to small business trade performance in the traditional economy. In short, of the ebay-enabled SMEs in the United States are exporters. The range among the 5 states is from in one state to in nine states. These export figures dwarf the export activity of traditional US businesses, which stands at nationwide. At the state level, the figures range from a low of.5 to a high of 2.1. SHARE OF EBAY-ENABLED SMES EXPORTING TradePort USA David Lahme SOMERSWORTH, NH David Lahme started his career in media and advertising sales before diving into the computer industry. He joined a national value added reseller as a National Account Executive selling technology products and integrated services such as ecommerce platforms. His successful sales career and leadership led David to be recruited to join a business-tobusiness software company, where he served as the Director of Sales. Yet, David wanted more. In 22, his entrepreneurial spirit and just $12, led David to launch TradePort USA with his co-founder Sam Biddle. Since then, TradePort USA has offered outsourcing services for asset recovery, third-party logistics, and reverse logistics for consumer electronics. TradePort USA regularly gives their limited profits back to the community to help maintain its steady economy. They provide regular donations to charities, local churches and local schools. David also proudly employs many New Hampshire residents. OH PA CO NH NE AL TX WA Figure 2.1 ebay-enabled SMEs Traditional Businesses VIEW 5-STATE CHART 11 Source for total number of companies that have at least one employee in addition to the owner (21): US Census Bureau, Business Dynamics Statistics, Longitudinal Business Database Source for total number of companies that have no employees (21): US Census Bureau, Nonemployer Statistics, Source for total number of exporting companies (21) US Census Exporter database Share = (total number of exporters)/((number of employing companies)+(number of non-employing companies))

9 SHARE OF EBAY-ENABLED SMES THAT REACH TEN OR MORE DIFFERENT FOREIGN DESTINATION MARKETS Another measurement of the scale and scope of exporting involves the number of country markets reached. It is generally believed that businesses considering exporting to a new country market face costs of entry, and therefore expanding their business by exporting to more country markets leads to higher entry costs. 12 Escalating entry costs leads to the presumption that smaller firms will tend to export to fewer countries. As another measurement of the scale of ebay-enabled SME exporting activity, we calculated the share of Commercial Sellers who exported to ten or more country markets in 214. US Census Bureau data indicates that of all US exporters 1, not just SMEs, reach ten or more markets. These percentages are significantly lower than the 5 of ebay-enabled SMEs in the United States reaching ten or more markets. Again, the state-by-state analysis reveals a range from 51 to 6 of ebay-enabled SMEs exporting to ten or more foreign markets in 214, far exceeding the state-by-state range of 2 to 12 in the traditional economy. SHARE OF EBAY-ENABLED SMES THAT REACH TEN OR MORE DIFFERENT FOREIGN DESTINATION MARKETS Fashionphile Sarah Davis CARLSBAD, SAN FRANCISCO & BEVERLY HILLS, CA Founded by Sarah Davis in 1, Fashionphile has worked hard to become the leading online reseller of pre-owned luxury handbags. The business s online success has enabled Sarah to open three boutiques across California. Fashionphile offers the largest selection of pre-owned vintage, rare, and limited edition handbags from some of the most coveted luxury designers. In 214 a Brazilian blogger had a Fashionphile handbag shipped to a New York hotel where she was staying and shared her experience on a popular Brazil fashion blog. Word about Fashionphile spread throughout the country, pushing Sarah to find ways to safely expand its international sales to Brazil, a country she previously avoided. Fashionphile exports 2 of its products IL MD ID CT SD GA AZ CA ebay-enabled SMEs Traditional Businesses Figure 2.2 Note: Only exporters are considered VIEW 5-STATE CHART 12 For example, see Roberts, Mark J. and James R. Tybout, Directions in Development: What Makes Exports Boom? (Washington, D.C.: The World Bank, 1a); Bernard, Andrew. AndJoachim Wagner, Export entry and exit by German firms, Review of World Economics (Weltwirtschaftliches Archiv), (21), ; Bernard, Andrew and J. Bradford Jensen, Entry, Expansion, and Intensity in the U.S.Export Boom, 1-12, Review of International Economics, 12 (24b), US Census Bureau. See exhibit 4a in release available at

10 AVERAGE NUMBER OF FOREIGN DESTINATION MARKETS As with the previous data point, and based on the concept that entry costs are a barrier to exporting to additional countries, it would be expected that smaller firms would export to fewer countries; at least, that is the expectation for traditional exporting firms. The ebay-enabled SME average across the US is 1 different export markets, and the range among the states runs from 14 to 21. The state-bystate average of export markets reached by traditional businesses is just 1 to 4 export markets. AVERAGE NUMBER OF FOREIGN DESTINATION MARKETS 1 IL NY 1 ID 1 RI ND TN TX OR Anglers Habit Wayne Johnson CALDWELL, ID Wayne always had a passion for fly-fishing and decided to turn that passion into a business. Expanding to online sales was accidental for Wayne. He was shopping online for a rare car part that he could not find locally when he realized how easy it was to buy and sell things on the Internet. He then put a couple of his own fly fishing rods up for sale and was shocked at the demand for his product. That s when Wayne realized he could grow his traditional brick and mortar store through the Internet. Anglers Habitat would be unable to survive through walk-in traffic alone, which is why Wayne uses the Internet as an avenue to keep his business steady year-round and reach a worldwide customer base the business exports 1 of its products. Today, Wayne employs eight people in his community and operates two brick and mortar stores. ebay-enabled SMEs Traditional Businesses Note: Only exporters are considered Figure 2. VIEW 5-STATE CHART Exports are a central part of America s economic growth; with exportsupported jobs paying 15-1 more. Yet less than one percent of small businesses export; and of those that do, 5 percent of them export to only one country. Unlocking trade opportunities for small businesses is key to continued growth and expansion. 14 -The Honorable Maria Contreras-Sweet, Administrator, U.S. Small Business Administration 14 U.S. Small Business Administration. SBA Announces Funding to Boost Export Opportunities for Small Businesses [Press Release] August 24, 215. Available at 1

11 SHARE OF EBAY-ENABLED SMES EXPORTING TO BUYERS ON FOUR OR MORE CONTINENTS Though a non-traditional measurement of scale and scope of exporting activity, we have calculated the continental reach of ebay-enabled SMEs. For the purposes of this analysis, sales were designated to buyers on one of six continents: North America, South America, Europe, Asia, Africa and Australia. When an ebay-enabled SME exported to a buyer in a country on a continent, they were credited with an export to that continent. Additionally, when an export is made to a country on the same continent as the seller, that sale is counted as an export to that continent (e.g. A sale from an Iowa seller to a buyer in Canada is an export to North America). The report considers an SME with sales to four or more continents in a year to be a Global Seller. The national share of ebay-enabled SMEs in the US in 214 who were Global Sellers reaching four or more continents was 64. The range of ebay-enabled SMEs achieving Global Seller designation among the states was from 55 to 6. SHARE OF EBAY-ENABLED SMES EXPORTING TO BUYERS ON FOUR OR MORE CONTINENTS MDG Sales Mac Griffiths SOUTH JORDAN, UT As early as he can remember, Mac Griffiths has had an entrepreneurial spirit. With a background in computer science, Mac left his full-time job in 22, to open an ebay store specializing in the sale of computer/networking equipment and software. In the beginning Mac sold out of his own home, from which his wife Maria would go to the post office with bags full of boxes to ship. Today Mac employs five people, two full-time and three part-time, and has an office/warehouse to run the business and store inventory. Owning an ebay enabled small business gives Mac the flexibility to balance both family and work. MDG Sales exports 25 of its sales WI DC UT VT IA WV AZ HI Note: Only exporters are considered Figure 2.4 VIEW 5-STATE CHART 11

12 SHARE OF EBAY-ENABLED SMES EXPORTING TO TRANS-PACIFIC PARTNERSHIP COUNTRIES The United States has negotiated a comprehensive trade agreement with eleven countries in the Pacific region. Called the Trans-Pacific Partnership (TPP), the agreement encompasses: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam. In 214, 2 of ebay-enabled SMEs in the United States exported to one or more of the TPP countries. The range among the 5 states and the District of Columbia was 6 to 5. SHARE OF EBAY-ENABLED SMES EXPORTING TO TRANS-PACIFIC PARTNERSHIP COUNTRIES Figure 2.5 MI NJ UT CT MO NC NM CA VIEW 5-STATE CHART SHARE OF EBAY-ENABLED SME EXPORTS TO TRANS-PACIFIC PARTNERSHIP COUNTRIES Along with the overwhelming number of ebay Commercial Sellers being exporters to TPP countries in 214, the eleven TPP export markets accounted for a robust of all export sales by ebay-enabled SMEs in the United States. On a state-by-state basis, the share of ebay Commercial Sellers exports accounted for by TPP countries showed more variation than most ebay export-related data analysis, ranging from 25 to 45 in 214. SHARE OF EBAY-ENABLED SME EXPORTS TO TRANS-PACIFIC PARTNERSHIP COUNTRIES Figure 2.6 IN PA MT ME NE KY OK OR VIEW 5-STATE CHART 12

13 TRANSLATING TRADE SUCCESS TO GROWTH PERFORMANCE: EBAY COMMERCIAL SELLER PERFORMANCE IN THE UNITED STATES Expanding small business access to global opportunities is important from an economic fairness and inclusiveness perspective, but trade is also considered a sign of healthy firms. The Institute for International Economics reports that US companies that export grew faster and were percent less likely to go out of business than non-exporting companies. 15 Where the previous section reported on the trade activity of ebay-enabled SMEs in every state across America, this section will report data on various non-trade performance metrics of ebay-enabled SMEs in the United States. Once again, economic activity data on ebayenabled SMEs will be compared to traditional measures of economic performance where available. AVERAGE ANNUAL GROWTH IN THE NUMBER OF EBAY COMMERCIAL SELLERS As noted earlier, all of the analysis in this report is limited to transactions by sellers with $1, USD or more in sales annually on the ebay Marketplace these are called Commercial Sellers or ebay-enabled SMEs. The number of Commercial Sellers in the United States increased by an average of per year over years Given the overwhelming share of all firms in the United States being small businesses,. according to World Economic Forum data, we chose to compare the rate of growth of the number of ebay Commercial Sellers to the average annual growth rate of GDP, which was 4 nationwide over the period Likewise, the state level average annual growth rate of GDP over the same time period is provided as a proxy for overall SME health. StereoBuyers Adam Wexler NEW YORK, NY StereoBuyers, known to its ebay customers as High End Audio Auctions, is a locally owned, family-run business focused on buying and selling High-End pre-owned HiFi audio equipment. The seed of StereoBuyers was planted in the mid 1s. As a college student, Adam wanted a high end stereo, but could not afford one. That s when he got the idea to buy and sell stereo equipment that had been traded into a local HiFi shop. After graduation, Adam continued to run StereoBuyers part time until 2, when he left his fulltime job a one of Manhattan s top high-end AV salesmen and designers to pursue the business full-time. In 212 Hurricane Sandy completely wiped out Adam s business and putting his warehouse and products in feet of water. Luckily, through hard work and determination, Adam and the StereoBuyers team were able to build themselves back up. StereoBuyers exports about of its products. AVERAGE ANNUAL GROWTH IN THE NUMBER OF EBAY COMMERCIAL SELLERS Figure WI NY MT CT KS SC AZ CA Commercial Sellers Average Annual Growth in GDP VIEW 5-STATE CHART 15 International Trade Administration, 215, Exporting is Good For Your Bottom Line. Available at World Economic Forum, 215, What Companies Want From the World Trading System. Available at Regional data by the Bureau of Economic Analysis (BEA) of U.S. Department of Commerce ( 1

14 EBAY CONTINUOUS COMMERCIAL SELLERS In this report, the term Continuous Commercial Sellers refers to ebay Commercial Sellers in 214 the final year of the report who sold above the $1, USD threshold throughout the five-year time period of These SMEs with five years or more of continuous operations selling above $1, USD annually include the most mature and established operators on the platform. We calculated the compound annual growth rate (CAGR) of the sales of these Continuous Commercial Sellers in every state. These established SMEs have strong growth rates across the board, with the CAGR of US Continuous Commercial Sellers on a state-by-state basis ranging from to 2 over the time period, and the rate across the US overall at 2 per year. As an offline comparable economic growth statistic, the Compound Annual GDP Growth Rate for the overall US economy from was., while the range for this figure among the 5 states was 1.4 to COMPOUND ANNUAL GROWTH RATE IN SALES OF EBAY CONTINUOUS COMMERCIAL SELLERS ABC Vacuum Warehouse Richard Baccus AUSTIN, TX Richard s father started ABC Vacuum Warehouse back in. Richard worked for the company under his father, until leaving for college, where he ran two small businesses while earning his degree. Upon graduation, he started his career at the corporate office of pizza giant Papa Johns. This is where Richard first started familiarizing himself with online sales, as the company sought to become the pioneer of online pizza delivery. During the same time, in the hopes of expanding sales, Richard s father asked him to help set up a website for ABC Vacuum Warehouse. The website was such a successful venture that Richard went back to the family business full-time. ABC Vacuum Warehouse joined ebay in 2, and the business has grown exponentially from the natural extension of customers the online platform offers. Richard now helps fellow small businesses get off the ground and become successful. IN NJ ID MA MN VA TX NV Continuous Commercial Sellers Compound Annual GDP Growth Rate Figure.2 VIEW 5-STATE CHART 1 Regional data by the Bureau of Economic Analysis (BEA) of U.S. Department of Commerce ( 14

15 NEWCOMERS The phenomenon of new enterprise creation and establishment is widely seen as a key indicator of business and economic dynamism. 1 In this report, we consider Newcomers in 214 to be ebay Commercial Sellers who are four years old or younger, in this case measured by the absence of any sales in 21. For the purpose of this report, these are classified as a new enterprise or a start-up. Among all of the Commercial Sellers in the United States in 214, 41 were Newcomers. On a state-by-state basis, the share of Newcomers in 214 was spread along a range covering 2 to 5. SHARE OF EBAY-ENABLED SMES THAT WERE NEWCOMERS MI 42 DE 4 WY 5 ME MO 45 FL 41 OK 42 AK QuikDrop Joe Migliorino STUART, FL Before opening QuikDrop, Joe Migliorino was Vice President of Business Development for Century 21 in New York. After relocating to South Florida in 24, he noticed a high demand for assistance with business and estate liquidation. To meet this need, Joe purchased a franchise operation from a company piloting ebay drop-off stores stores where people can drop off their high-value items to be sold on ebay. The QuikDrop main franchise soon went out of business, but Joe bought his franchise separately and has now been running the business independently for 1 years. He and his wife are the owner-operators, with one part-time employee. Joe uses ebay s Global Shipping Program to reach international customers and today sells about 12 of products globally. Through the years Joe and his wife have helped countless customers get top dollar for their items gaining invaluable knowledge with each transaction and becoming expert appraisers along the way. Figure. "When it comes to job-creating power, it is not the size of the business that matters as much as it is the age. New and young companies are the primary source of job creating in the American economy. 2 VIEW 5-STATE CHART -Jason Wiens and Chris Jackson, Ewing Marion Kauffman Foundation 1 IOECD (215), Entrepreneurship at a Glance 215, OECD Publishing, Paris. DOI: 2 Wiens, Jason and Chris Jackson, 215. The Importance of Young Firms for Economic Growth. Ewing Marion Kauffman Foundation Entrepreneurship Policy Digest. Available at: 15

16 DIGITAL DENSITY COUNTY LEVEL EBAY SMALL BUSINESS ACTIVITY ANALYSIS Small online businesses operate on ebay from across the United States, including every state and the District of Columbia. Likewise, ebayenabled SMEs are operating from across each state, whether based in densely populated urban centers, suburbs, exurbs, townships or even rural communities. But we wanted to know, which counties actually have the most active ebay-enabled SME communities? There are,141 counties and county equivalents in the 5 States and the District of Columbia. 21 There are dramatic differences in the population levels of those counties, ranging from California s Los Angeles County with over 1.1 million residents in 214, to 5 counties that were home to fewer than 1, people. To provide a ranking of counties across such varied population levels, we have analyzed two indicators of small online business activity on a per capita basis within each county: (1) the number of Commercial Sellers per 1, inhabitants and (2) sales by Commercial Sellers per 1, inhabitants. Together these indicators make up what we call Digital Density. 22 The map below shows the location of the Top 2 counties in America based on Digital Density. To develop this ranking, we first identified the top 5 of counties in America based on the number of ebay Commercial Sellers per capita. Then, we ranked those counties based on total ebay sales of all the Commercial Sellers in each of those counties on a per capita basis. A list of the ebay Digital Density Top 1 counties in America can be found in Appendix B of this report. Hardware Sales The McClellan Family FERNDALE, WA The McClellan family started Hardware Sales, formerly Powder Sales, in 2, specializing in sales of dynamite to loggers, miners, and road builders. This family-owned and operated business became an integral part of their small Washington state community, as the one-stop hardware store. However, in 2, the success of mainstream big box retailers, forced the family to adapt to the changing retail landscape by opening a Hardware Sales Internet division. That s when they brought in Steve Douge, who had experience in online sales to run their Internet division. What started as an ebay only operation has now expanded to its own website. The company regularly gives back to the community through their work with the local Boys and Girls club, as well as donating tools and equipment to organizations such as Habitat for Humanity and other non-profit building projects. Hardware Sales exports around 25 of its products. 21 United States Geological Survey The Digital Density score is a weighted combination of indicators 1 and 2. The weighted average puts more emphasis on the sales per small online businesses, as starting up a business is the first step to selling.

17 As a sign of the breadth and diversity of the national community of ebay Commercial Sellers, the Top 2 counties include decidedly rural Casey County, in the Appalachian region of Kentucky, and Essex County, Vermont, on the border with Canada and the least populous county in New England. Also included were Los Angeles County, California, and Kings County, New York, more widely known an Brooklyn, the most populous borough of New York City. Of the eight regions employed by the United States Bureau of Economic Analysis, six are represented among the Top 2 counties. Of the,141 counties in America, 2.5 were home to at least one ebayenabled SME in 214. Of the mere 26 counties that were not home to an ebay Commercial Seller in 214, had a population of fewer than 5, residents, 1 counties had a population of greater than 1,, and two counties had a population of greater than 2,. No county in America with a population exceeding 21, failed to have at least one resident ebay-enabled SME.

18 POLICY RECOMMENDATIONS The Internet has opened up a world of opportunity for businesses of all sizes across America and around the globe. ebay is committed to providing small businesses with the means and opportunities to grow their operations and create wealth in their own communities. The below policy recommendations will work to drive even greater economic growth among small American businesses that use the Internet to export: INCREASE LOW VALUE CUSTOMS DE MINIMIS THRESHOLDS ACROSS THE GLOBE ebay supports US Government efforts to build off of the successes achieved in the Trade Facilitation and Trade Enforcement Act, and work with trading partner nations to increase low value customs de minimis thresholds across the globe. Expanding de minimis thresholds promotes trade and economic opportunities for SMEs by reducing the time, cost, and uncertainty of moving the packages of technology-enabled SMEs across borders. SUPPORT THE TRANS-PACIFIC PARTNERSHIP AGREEMENT (TPP) AND OTHER EFFORTS TO MODERNIZE TRADE POLICY Small technology-enabled businesses are not realizing their full trade potential, as outdated trade policies around the world limit their reach. ebay supports the TPP and ongoing trade policy negotiations that seek to reduce barriers to e-commerce, improve parcel delivery, maximize market access for SMEs, and support other services vital for smaller exporters to do business. MODERNIZE POSTAL SYSTEMS TO SUPPORT SMALL BUSINESS DIGITAL TRADE Postal services have largely been developed for domestic letter transmission; however, today s postal networks are a critical piece of the logistics chain for small internet-enabled exporters and increasingly valuable as an economic and trade facilitator for SME traders. The US Government should work collaboratively with trading partners to update global postal systems. Simplification, modernization, and international harmonization of national postal services, as well as more robust cooperation with private shippers, will promote greater and more broadbased SME commerce opportunities. 1

19 PROMOTE THE US STANDARD OF INTELLECTUAL PROPERTY LAW IN TRADE AGREEMENTS The principle that Internet service providers are not held liable for the unlawful actions of their users if they do not have knowledge of the offenses has been engrained in U.S. law. Unfortunately, not all foreign legal regimes have these important protections. Trade agreements can be used to harmonize liability regimes in a manner that encourages countries to adopt policies that support SME e-commerce and opportunity. Additionally, regulators must prevent protectionist bans on sales via online marketplaces and search restrictions forced upon retailers seeking to sell legitimate products on the Internet. ENSURE A FREE AND OPEN INTERNET The open Internet is integral to the continued ability of small businesses to gain from the global opportunities that the Internet offers. Policymakers should support the continued expansion of access to the open, global Internet, as well as global commerce platforms and intermediaries that connect entrepreneurs and technology-enabled SMEs with international markets. Clear rules must be implemented globally to ensure open cross-border data flows and access to foreign markets. EXPLORE FLEXIBLE INTERNATIONAL REGULATORY COOPERATION SOLUTIONS The emergence of micro and small businesses as global traders is a highly inclusive and growth-positive economic development that should not be undermined by outdated national regulatory models. Policymakers should explore non-national legal instruments to promote consumer protection in a manner that welcomes SME traders into the global commerce regime side-by-side with established global companies. PROVIDE COORDINATED EXPORT PROMOTION ASSISTANCE TO INTERNET-ENABLED SMES Establish public-private initiatives to increase information and export resources for small businesses (e.g. incorporate curriculum/training into existing SME development programs), better coordinate federal, state and local export programs, and partner with companies like ebay to support smaller existing or potential exporters, including veteran, minority and women-owned small businesses. 1

20 APPENDIX A: CHARTS, METHODOLOGY, AND SOURCES 2

21 SHARE OF EBAY-ENABLED SMES EXPORTING The ebay data reflects the share of 214 ebay-enabled SMEs (those with $1, USD or more in sales annually on the ebay Marketplace) in each state, who exported in that year AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY ebay-enabled SMEs Traditional Businesses Traditional Business Source Source for total numb er of companies that have at least one employee in addition to the owner (21): US Census Bureau, Business Dynamics Statistics, Longitudinal Business Database Source for total number of companies that have no employees (21): US Census Bureau, Nonemployer Statistics, Source for total number of exporting companies (21) US Census Exporter database Share = (total number of exporters)/((number of employing companies)+(number of non-employing companies))

22 SHARE OF EBAY-ENABLED SMES THAT REACH TEN OR MORE DIFFERENT FOREIGN DESTINATION MARKETS The ebay data reflects the share of exporting 214 ebay-enabled SMEs (those with $1, USD or more in sales annually on the ebay Marketplace) in each state, who exported to 1 or more different foreign markets in that year AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY ebay-enabled SMEs Traditional Businesses Note: Only exporters are considered Traditional Business Source US Census Bureau, US Census data, Average number of countries reached by exporters in each state for year 21.

23 AVERAGE NUMBER OF FOREIGN DESTINATION MARKETS The ebay data reflects the average number of different foreign markets reached by 214 ebay-enabled SMEs (those with $1, USD or more in sales annually on the ebay Marketplace) in each state, who exported in that year AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY ebay-enabled SMEs Traditional Businesses Note: Only exporters are considered Traditional Business Source U.S. Census Bureau, US Census data, Export Trade data totals at the state level for number of exporters, known value of exports and number of partner countries for year 21.

24 SHARE OF EBAY-ENABLED SMES EXPORTING TO BUYERS ON FOUR OR MORE CONTINENTS The ebay data reflects the share of exporting 214 ebay-enabled SMEs (those with $1, USD or more in sales annually on the ebay Marketplace) in each state, who exported to four or more continents in that year AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY Note: Only exporters are considered

25 SHARE OF EBAY-ENABLED SMES EXPORTING TO TRANS-PACIFIC PARTNERSHIP COUNTRIES The ebay data reflects the share of 214 ebay-enabled SMEs (those with $1, USD or more in sales annually on the ebay Marketplace) in each state, who exported to one or more of the following countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY

26 SHARE OF EBAY-ENABLED SME EXPORTS TO TRANS-PACIFIC PARTNERSHIP COUNTRIES The ebay data reflects the share of all export sales by 214 ebay Commercial Sellers (those with $1, USD or more in sales annually on the ebay Marketplace) in each state, in that year, that went to buyers in one or more of the following countries: Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, and Vietnam AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY

27 AVERAGE ANNUAL GROWTH IN THE NUMBER OF EBAY COMMERCIAL SELLERS The ebay data reflects the annual average growth (total growth / 4) in the number of ebay Commercial Sellers (those with $1, USD or more in sales annually on the ebay Marketplace) in each state from 21 to AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY ebay-enabled SMEs Average Annual Growth in GDP GDP Growth Source Regional data by the Bureau of Economic Analysis (BEA) of U.S. Department of Commerce (

28 COMPOUND ANNUAL GROWTH RATE IN SALES OF EBAY CONTINUOUS COMMERCIAL SELLERS The ebay data reflects the compound annual growth rate in sales [(214 sales / 21 sales) ^.25 1] for ebay Commercial Sellers (those with $1, USD or more in sales annually on the ebay Marketplace) in each state that reached this sales threshold in all the following years: 21, 211, 212, 21, and AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY ebay-enabled SMEs Compound Annual GDP Growth Rate GDP Growth Source Regional data by the Bureau of Economic Analysis (BEA) of U.S. Department of Commerce (

29 SHARE OF EBAY-ENABLED SMES THAT WERE NEWCOMERS The ebay data reflects the share of 214 ebay Commercial Sellers (those with $1, USD or more in sales annually on the ebay Marketplace) in each state that had zero sales on ebay in AK AL AR AZ CA CO CT DC DE FL GA HI IA ID IL IN KS KY LA MA MD ME MI MN MO MS MT NC ND NE NH NJ NM NV NY OH OK OR PA RI SC SD TN TX UT VA VT WA WI WV WY

30 APPENDIX B: DIGITAL DENSITY TOP 1 COUNTIES

31 DIGITAL DENSITY TOP 1 COUNTIES 1) Essex County Vermont 2) Fulton County Ohio ) Sarasota County Florida 4) Rockland County New York 5) Kings County New York 6) Middlesex County New Jersey ) Casey County Kentucky ) Los Angeles County California ) Orange County California 1) Bergen County New Jersey 11) Whatcom County Washington 12) Nelson County North Dakota 1) New York County New York 14) Nassau County New York 15) Montgomery County Pennsylvania ) Broward County Florida ) Seminole County Florida 1) Clinton County New York 1) Gwinnett County Georgia 2) Clackamas County Oregon 21) Falls Church City Virginia 22) Taney County Missouri 2) Lake County Illinois 24) Morris County New Jersey 25) Miami-Dade County Florida 26) Lapeer County Michigan 2) Monmouth County New Jersey 2) Ventura County California 2) Bucks County Pennsylvania ) Warren County New Jersey 1) Lake County Ohio 2) DuPage County Illinois ) Rockingham County New Hampshire 4) Lewis County Idaho 5) Hunterdon County New Jersey 6) Oakland County Michigan ) Pinellas County Florida ) Washington County Utah ) Worcester County Maryland 4) Bloomfield County Colorado 41) Ocean County New Jersey 42) Allen County Indiana 4) Carson City Nevada 44) Cherokee County Georgia 45) Santa Clara County California 46) Clay County North Carolina 4) Palm Beach County Florida 4) Cheshire County New Hampshire 4) Sevier County Tennessee 5) Placer County California 51) Douglas County Nevada 52) Monroe County Florida 5) San Diego County California 54) Camden County New Jersey 55) Flagler County Florida 56) San Francisco County California 5) Orange County Florida 5) Hinsdale County Colorado 5) McHenry County Illinois 6) Medina County Ohio 61) Niagara County New York 62) Blaine County Nebraska 6) Monroe County Pennsylvania 64) Mille Lacs County Minnesota 65) Macomb County Michigan 66) Clark County Nevada 6) Citrus County Florida 6) Suffolk County New York 6) Multnomah County Oregon ) Litchfield County Connecticut 1) Lancaster County Pennsylvania 2) Richmond County New York ) Waukesha County Wisconsin 4) Racine County Wisconsin 5) Orange County New York 6) El Dorado County California ) Hillsborough County New Hampshire ) Washington County Rhode Island ) Pembina County North Dakota ) Volusia County Florida 1) Haines Borough Alaska 2) Josephine County Oregon ) Rutland County Vermont 4) Hamilton County Indiana 5) Washington County Oregon 6) Union County Georgia ) Lincoln County Oregon ) Pasco County Florida ) Hernando County Florida ) Martin County Florida 1) Lake County Florida 2) Pike County Pennsylvania ) Lebanon County Pennsylvania 4) Colonial Heights City Virginia 5) Kent County Rhode Island 6) Ulster County New York ) Luzerne County Pennsylvania ) Costilla County Colorado ) Lee County Florida 1) Dawson County Georgia 1