Recent declines in the value of the Australian dollar and publicity over the China Free Trade Agreement has brought the issue of Australia’s more than $300 billion worth of exports back into sharp relief.
As the local economy softens after years of commodities fuelled growth, Australian companies are once again looking further afield for opportunities.
Indeed many new businesses, such as online retailers are born global.
Take for instance the country’s legion of eBay sellers. While not necessarily an obvious candidate to lead the export charge, merchants on the global platform punch well above their weight according to figures provided by Jooman Park, eBay Australia and New Zealand, Managing Director.
An eBay inc. report called Commerce 3.0: Enabling Australian Export Opportunities and based on research by the global law firm Sidley Austin LLP, found that more than three-quarters of commercial eBay sellers export, compared with only 2 per cent of all registered businesses in Australia.
“Furthermore the study found that on average, commercial eBay exporters ship to 28 destinations, while traditional exporters only ship to three,” said Mr Park.
Paul Greenberg, the head of the National Online Retailers Association said: “Australian retailers big and small are embracing the regional opportunity, and prospering. At the bigger end of town, established retailers like Smiggle and Cotton On are opening stores in the APAC region, and wrapping a digital consumer offer around it.”
“Newer online retailers like Ozsale, part of the MySale group, were early pioneers into Asia with growth in Thailand and Malaysia. Niche fashion retailers like Black Milk and Birdsnest are moving into the region, recognizing that aspirational shoppers in the region want something different, and that ‘brand Australia’ offers that,” he said.
The explosive growth of marketplaces like Amazon, Alibaba, Tmall, Taobao, Rakuten and others provides a fast-track opportunity, he said.
“Australian retailers have always recognised that growing a business requires both the retention of existing customers and acquiring new ones. The new ‘flat world’ retail is that fast track to building a much bigger addressable markets.”
Getting supply chains right
Greenberg said Australian business faced supply chain challenges when expanding overseas but these were fast being addressed by new offers and services from organisations like Singapore Post, and Startrack, a business of Australia Post.
A case in point is Australian beauty brand Bellabox – which sends subscribers boxfuls of skin care and make-up samples. The company’s initial foray overseas was a physical presence in Singapore but CEO Sarah Hamilton found the city-state “wasn’t right for us”.
“We found our Singaporean customers wanted not only cosmetics but massive brands as well like Chanel and Dior,” Hamilton said. “We were the biggest box in the market but the work required from a resources perspective to devote to what was a small percentage of the overall business didn’t make sense.”
The original plan had been to launch in 10 countries in three months but the CEO quickly learned that setting up standalone operations in each country “was a bit unrealistic for us and not 100 per cent necessary”.
The company recently moved into China with a virtual storefront on Australia Post’s Tmall store. Australia Post handles shipping into Shanghai, a free trade zone. From there, ChinaPost ships the product to the consumer within 3-4 days.
“We embraced the China opportunity because of its surging beauty market and the significant relaxing in the barriers to entry especially with the Free Trade Agreement coming into effect,” she said.
With Australia Post managing the logistics, it has allowed the BellaBox team “to focus on the things we are good at”.
For Frank Granziera, founder and CEO of Australian skin care company, Olive Oil Skin Care Co “finding the right partner is the most important thing” when expanding overseas with Tmall.
“You’ve got to find a local partner prepared to market your product not just purely on price alone but someone who understands the ethics of your business, what you’re trying to do, and use that as part of its marketing tools,” he said.
Beyond its physical presence with local retailers in South East Asia, Olive Oil Skin Care Co has been able to move into the region through Australia Post’s Tmall store and Alibaba.
“Alibaba is a huge organization with databases containing hundreds of millions of consumers. They have aggressive marketers and it’s a fantastic portal that is going to get hundreds of millions of people looking at your product,” Granziera said.
Success in exports clearly involves much more than simply hanging out a shingle whether it be physical or digital and waiting for the world to beat a path to your door.
Damon Cantwell, Deloitte partner for manufacturing said when his company works with clients who are looking to export it tests a number of ideas.
“We look at the sustainability of an Australian company’s decision. You can’t assume the dollar is going to remain low for ever. Organisations need to make sure that their business model is going to be resilient. It needs to be based on the right areas of competition so it can cope with fluctuations in the currency or with changes in market demand.”
Cantwell nominates three issues in particular that businesses should consider.
“The first is how much research have they done.”
Here agencies such as Austrade and the state trade promotion agencies can be invaluable, he says. “Prioritisation is important because people are time and resource poor. You can waste a ton of shoe leather if you are not looking in the right place.”
The second issue is distribution.
Cantwell for instance says that unlike retailers, the local manufacturers in his area of specialisation are not yet taking full advantage of the kinds of ecommerce opportunities that have emerged in recent years, especially in markets like China.
“Just understanding and getting the distribution network right is important. It is very tough for first time exporters going into new markets.”
And finally, he says, contingency planning is critical. “What will you do if the dollar shoots back up, if there’s a 30 per cent correction in the market…or a dispute over a shipment of goods. What contingency arrangements do they have in place?”