Trade tensions in the Asia-Pacific region dampened growth for business last year, but the CPA Australia Small Business Survey has found that not everyone is gloomy about their prospects.
The trade tensions between the US and China trade is already affecting businesses in the Asia-Pacific region, according to the CPA Australia Asia-Pacific Small Business Survey 2018.
The survey, in its 10th year, found 2 per cent fewer Asia-Pacific businesses said they grew last year compared to 2017, which can be attributed to trade tensions across the region, says Gavan Ord, CPA Australia’s manager – business and investment policy.
More than half (52 per cent) of Hong Kong firms expect a negative impact from any global trade war on their business. Small businesses in Taiwan and Vietnam are also more worried about negative impacts on their business from trade tensions compared to their peers in mainland China.
Interestingly, more firms located in the southern Chinese city of Shenzhen expect positive impacts from any trade war compared to those that are worried about market declines. This could be because these small businesses expect higher tariffs on US imports to make their products more competitive within China, says Ord.
Small business growth in Asia-Pacific
Businesses from Vietnam, Indonesia, the Philippines and mainland China reported the highest growth in 2018. Singaporean and Malaysian businesses also experienced buoyant conditions last year.
In contrast, there was a relatively large drop in the number of Australian and Hong Kong small businesses reporting growth between 2017 and 2018.
The trend is set to continue in 2019, with small businesses in the Philippines, Vietnam and Indonesia most confident about their growth prospects, while those in Australia and Hong Kong are the least confident. Malaysian businesses also have expressed confidence in their growth prospects this year.
Tech on top
The survey results showed businesses that are experiencing sustainable growth are more likely to have a strong focus on technology and a commitment to improving customer satisfaction. They also tend to be innovative when it comes to products, processes and services and seek to enter new markets.
The research showed 75.2 per cent of respondents who grew strongly in 2018 reported that during the year they had invested in technology and it was already profitable.
Among this group, 67 per cent earned 11 per cent or more of their revenue from online sales, while 66.5 per cent received 11 per cent or more of their sales through new payment technologies such as Alipay.
Shift away from online sales
A new finding in the 2018 survey was a small shift away from online sales, with the number of businesses not selling online increasing four per cent compared with 2017. Ord believes that this could be attributed to falling community confidence in the way some tech companies are handling personal data and a greater focus by small business on customer loyalty.
Businesses that have built stronger relationships with customers may be reverting to more traditional means of selling in a more challenging period, he suggests.
Asian businesses are more likely to use technologies such as online sales, new payment technologies and social media than their counterparts in Australia and New Zealand. This is because Asian businesses believe their tech investments will produce a return sooner.
Small business and social media
Across Asia, 24.7 per cent of respondents intend to innovate through new products, processes or services in 2019. For Australia this figure is 6.7 per cent, while for New Zealand it’s 7.7 per cent.
Moreover, 45 per cent of Asian businesses use social media to sell products or services, versus just 16.6 per cent of businesses in Australia and 25.8 per cent in New Zealand.
Additionally, people working in Asian small firms tend to be younger than those located in Australia and New Zealand. The research shows younger survey respondents are more likely to use technology than older people.
According to this year’s survey, mainland Chinese small businesses are leading when it comes to e-commerce, and the use of new payment technologies such as Alipay, Apple Pay and WeChat Pay. As the report notes, “It would be difficult to find a business from mainland China that is not selling online or offering digital payment options.”
However, Ord says it is concerning that fewer businesses believe they will be hit by a cyberattack in 2019, compared to 2018, with businesses located in Australia and New Zealand the least concerned. In light of this finding, he says there’s comfort that nearly half of the businesses surveyed have reviewed their cybersecurity systems in the past six months, with companies in Vietnam and mainland China leading the pack.
How small business can grow
Commenting on steps small businesses can take to support their growth in this environment, Ord stresses the importance of developing an understanding of digital technologies so owners and managers can make the most of social media, e-commerce and new payment technologies.
“Seek advice on which technologies are best suited for your business and invest in them,” he recommends.
“Use data so you can learn more about your customers to improve customer satisfaction. It’s also an idea to look for government incentives that support innovation.”
Given their physical proximity to the region, Ord also suggests Hong Kong firms that wish to drive growth should explore opportunities in the Greater Bay Area, as well as with firms located in other Belt and Road Initiative economies and fast-growing parts of Asia.
It’s also important to remember business basics, he says. “Don’t forget to invest in improving the strategic and management skills of your business and review costs and risks on an ongoing basis.”
In total, 3607 small businesses completed the online survey, conducted between 16 November and 11 December 2018.
Survey participants, by country:
- 505 from Australia
- 764 from mainland China
- 279 from Hong Kong
- 305 from Indonesia
- 304 from Malaysia
- 310 from New Zealand
- 225 from the Philippines
- 303 from Singapore
- 303 from Taiwan
- 309 from Vietnam
What you need to know about subscription business models