How to tap into a world of Exporting possibilities
Selling your goods or services overseas can seem like a big leap – but it could be good for business.
Exporting can provide your business with benefits such as improved productivity, increases in sales and profits, new customers and potential growth opportunities.
In fact, exporting is associated with a higher likelihood of a business surviving. A study has found that exporters are larger, more productive, more skill- and capital-intensive and more innovative. The study also found that exporters tend to be robust during an economic shock. For example, Australian exporters were more resilient to the shocks of the pandemic than non-exporters.i
That is because exporters were able to spread their business across different markets, taking advantage of markets that were growing while others were floundering.
We often think of exporters as massive mining companies or manufacturers. But small businesses make up 62 per cent of the more than 56,000 Australian businesses that sell to international markets.ii
Online selling provides a platform
The growth in online sales is helping many small businesses to become exporters.
Despite online sales growth slowing a little in 2022, there has been an eyewatering expansion in online sales over the past 5 years. In 2016, global online sales were worth US$1.9 trillion or 8.7 per cent of retail sales.iii By the end of 2023, online sales are expected to reach US$6.51 trillion or 22.3 per cent of total retail sales.iv
While traditional exporting usually means selling to another business overseas such as a distributor, wholesaler or a retail store, online exporting provides more options including selling directly to consumers as well as experimenting with different business models and export methods. You might need to engage some extra help in logistics, social media, foreign language customer service and e-commerce website design.
You could join one of the major platforms such as Amazon, Etsy or eBay. For a fee, these types of platforms can give you a ready marketplace and may suit smaller businesses that are inexperienced in online selling.
What are the risks?
It pays to keep your eyes wide open when it comes to exporting. Success rests on being prepared and knowing the risks.
You will need to understand your potential customers by researching your target markets and looking into local regulations. One of the biggest risks is movements in the Australian dollar. When our dollar is low against other currencies, it is good news for you and your customers. You will still earn the same profit, but your product or service will be relatively cheaper for your customers. That might lead to an increase in demand and help you to win a bigger market share from competitors in other countries.
On the other hand, when the Australian dollar is strong and performing well against other currencies, goods and services are relatively more expensive for those in other countries.
Know the rules and regulations of the countries you are exporting to andwhat documentation is needed for your goods to clear customs, as this will vary between countries.
Another risk – a big spike in demand – might appear to be in the ‘good problem to have’ category but may cause business failure. Consider how your business could handle a large increase in overseas orders while still meeting demand for your Australian market.
Meeting the costs
Make sure you have enough working capital to fund a push into export markets. The costs involved can include hiring consultants to provide advice on aspects of e-commerce, website building, customs and export rules and specific markets, and you may need extra capital to increase production.
Export Finance Australia (EFA) provides small to medium businesses with loans to help with the finance needed to secure export contracts or purchase orders. EFA also provides approved export businesses a guarantee to help access finance from their bank.
All state and territory governments also offer support for exporters based in their jurisdictions.
If you would like to discuss how to prepare your business for exporting, give Scott Partners a call.