Identifying Growth Barriers of MSMEs in E-Commerce: Experimental Evidence from Indonesia

Researchers conducted a randomized experiment with MSMEs in Indonesia to examine important growth barriers facing online businesses. First, to identify the importance of search frictions, they boosted visibility of randomly selected newly-onboarded firms by exposing their products to consumers and evaluated the impact on sales. Second, to shed light on the logistical barrier, they tested whether remote sellers benefit less from the search barrier treatment, and whether offering shipping subsidies can help them grow.

In partnership with one of Indonesia’s e-commerce platforms, researchers piloted the intervention and conducted a phone survey between August-November 2021. The intervention includes boosting the visibility of randomly selected newly-onboarded sellers with discount coupons and providing shipping subsidies for buyers. While the data provided rich information about the characteristics of online firms, researchers found a very low take-up rate from buyers which indicates that advertisements might not be sufficient to help new MSMEs to increase visibility and generate sustained sales growth, suggesting that other important constraints are at play.

The research team is currently exploring a new research direction to address both the informational barrier and the search barrier for MSMEs operating on e-commerce platforms.

Contact ifii@povertyactionlab.org, to learn more about this project.