AN EXPORT STOCKTAKE
Our expanded export section covers burning issues around market validation, trans-Tasman trade, sector performance, Southeast Asian opportunities, and introduces some high-performing Kiwi export firms.
HOW IS NEW ZEALAND’S EXPORT SECTOR CURRENTLY PERFORMING? WHAT MARKETS SHOULD WE BE TARGETING AND WHAT TRENDS SHOULD WE BE PREPARING FOR? WHICH EXPORT STORIES STAND OUT? AND WHAT’S THE ADVICE FOR FLEDGLING EXPORT BUSINESSES? READ ON FOR SOME ANSWERS.
Acertain former New Zealand Prime Minister was often known to trot out the phrase “we won't get rich selling to ourselves”. He was right of course – New Zealand’s future and prosperity rides on the back of its ability to sell goods and services into overseas markets, and in increasing volumes every year. Our past performance proves we’re very good at it. Looking forward, with the latest ExportNZ DHL Export Barometer as evidence, there’s every indication that export growth will continue. More than half the respondents (52 percent) said their [export] orders had increased over the past 12 months. Forecasting ahead to 2019, 60 percent expect orders to increase and 34 percent expect them to remain at similar levels.
As for markets, Australia remains the most popular destination, with 74 percent of respondents exporting across the ditch, followed by North America at 41 percent, Europe 38 percent, the Pacific 36 percent, UK 30 percent and China 27 percent. (Interestingly, compared to last year, Europe jumped ahead of the Pacific and the UK bumped China out of the top five.)
New Zealand’s export trade covers many sectors but lately has been particularly strong in added-value food and beverages, manufacturing, and new digital businesses in the creative sector.
Catherine Beard, executive director of ExportNZ, is positive about New Zealand landing more free trade agreements (FTAs) to reduce trade barriers and give Kiwi exporters a more competitive playing field.
“The more market access we have the more we can spread our market risk and shield ourselves from any fallout from the emerging trade war that seems to be playing out between the US and China. We expect
this will not go away any time soon and it could intensify yet, which is concerning,” she says.
“Exporters are telling us that they are concerned with their competitiveness due to increasing costs in New Zealand, such as the changes to industrial relations law coming down the track. So it is this, the level of the New Zealand dollar and the escalating trade war that will be keeping exporters awake at night.”
For newcomers there are some powerful lessons to be learnt from seasoned export companies, and Beard points to some “awesome speakers” at ExportNZ’s Go Global conference earlier this year.
“It was great to see tech companies like Robotics Plus, Halter and Invenco doing the innovation in New Zealand, getting investment from US-based VCs and partnering with big national or multi-national’s to help take their product to the US and further afield.
“It is more of a step-up in terms of not having to own 100 percent of a company – but a smaller percentage of a company that has the potential to go really big with bigger partners in the mix,” she explains. “The secret of these three companies’ success is great innovation and finding the right partners to take it global.
“Another company with a great story was Doug Hastie and Syft Technology,” adds Beard. “Again, great technology, but what was missing and that Doug brought to the company was improved selling skills. Doug says just get out there and sell! Talk to your customers and find out what they want. Give them great service support and they’ll become repeat customers.
“He says we may have great technology developed in New Zealand, but we can be lousy at selling it.”
VALIDATE YOUR SOCKS OFF
In the 2018 New Zealand Export & Trade Handbook there is an excellent chapter put together by market development consultancy Katabolt, which offers a comprehensive export marketing strategy. At the centre of that strategy is market validation – the chapter devotes a lot of space to the subject. It raises the question that Texas University professor Rob Adams, a leading authority in market validation, challenges all aspiring exporters to answer: “Do I have clear, objective proof that a large enough number of people are willing to pay me money for the product or service I propose to sell?”
Validation is the essential step to increasing the likelihood of success and direct entry into a new market. It reveals what to sell, where to sell it, and to which customer.
Market validation leads to an understanding of the market landscape, which is often unique and nearly always distinctly different to New Zealand.
This understanding helps to define which segments of the market will be most interested in the product or service – and in turn the value proposition will be built around where the real market need has been identified.
Out of the validation process you will have an emerging picture of what the preferred market-entry model is for your business and the type of market partners best suited to achieve your objectives.
Katabolt research reveals that New Zealand’s top exporters spend time finding the right market partners. Choosing the right distributor for your business is essential. Most distributors will be able to sell your product. However, only a few will be able to understand your vision and will target your product to the areas that will allow for the most growth and success for your business.
ANALYSING SPECIFIC MARKETS: SOUTHEAST ASIA
Every market is different, so it makes sense to work with people on the ground in specific countries or regions.
In the case of Southeast Asia, Incite, an export development agency headed up by Singapore-based Cameron Gordon and Nada Young, offers knowledge built up over almost ten years in the local F& B sector. They work with a number of Australian and New Zealand F& B exporters.
“We’ve found that the best place to start is to focus on your category fundamentals,” explains Gordon. In Singapore, for example, these are:
1. Category analysis – Assessing the size of your category provides a key insight into the sales potential for your products. Unfortunately, unlike in New Zealand where offtake sales data can be purchased directly from retailers, in Singapore you must rely on big data firms to obtain this data and their fees can be extremely expensive.
“Unless you have very deep pockets, a pragmatic way to analyse your category is to fly to the market and visit some of the outlets of the major retailers. Take a good look at your category. How much floor space does it cover? How many competitors are on the shelves?”
2. Competitor analysis – How does your product measure up against the incumbent competitors in the category? Does your packaging live up to the standard set by the leaders in the category? Will consumers enjoy the taste of your products? Do the marketing messages on your packaging resonate with Singaporean consumers? 3. Price position – Correct price positioning is arguably the most important factor in determining success when entering Southeast Asian retail channels. A good pricing strategy will ensure your products are positioned well against your competitors in the category. Even an expensive advertising and promotion strategy cannot save a poor pricing strategy.
4. Distribution channels and cost of entry – The best way to mitigate the high entry costs (listing fees) in Singapore is to gain an understanding of which retail groups and store locations are the most relevant for your products. The goal should be to pay to enter only those stores that have a suitable customer base for your products. If you let your distributor or the retail buyer solely make this assessment for you, there is a good chance that you will end up paying listing fees for stores that are not relevant for your products.
“Taking the time to understand the retail landscape and your ability to compete in your category will set a strong platform for developing a winning export strategy,” says Gordon. (A Singapore Retail Channel Validation Guide can be downloaded from get.exportincite.com)
REFOCUSING ON JAPAN
With so much focus on the turbocharged China market in recent years, it’s hardly surprising that Japan, a market that has a long and significant diplomatic and trading history with New Zealand, may have slipped under the radar of Kiwi export firms.
But that should all change when the now-ratified 11-nation Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) delivers its first round of tariff cuts in early 2019.
The CPTPP is New Zealand’s first FTA with Japan – the world’s third largest economy and New Zealand’s fourth largest export market (our exports to Japan in the year to June 2018 totalled NZ$4.2 billion).
Those tariff reductions will deliver a competitive advantage for many Kiwi exporters – for a start it immediately removes the tariff advantage Australia’s beef producers have enjoyed at the expense of our red meat farmers.
The Japanese market will also deliver a number of one-off opportunities in the shorter term, with the upcoming Rugby World Cup and Olympics scheduled to be held there.
Having lived in Japan for several years, Ye Miao, assistant head of Asia Division at James & Wells, notes that New Zealand’s premium products are well suited to the desires of Japanese consumers, and margins are relatively high.
“Japan is a highly competitive market and its consumers are loyal to brands that deliver high quality products,” he says. “It’s therefore essential to get both the branding and product right at the beginning.”
From an IP perspective, competition in the Japanese market means it’s essential to develop an IP strategy as part of an overall Japanese market strategy. That means ensuring your brands are: • Not infringing on any pre-existing brands on the Japanese
Trademark Register, and • Are adequately protected to prevent other parties from negatively affecting or ‘coat-tailing’ off the reputation of the brand. Japan is a ‘first-to-file’ jurisdiction for trade marks, Miao points out, so ensure your brand/s are protected as early as possible.
He advises Kiwi exporters to obtain accurate local advice and translation for their intellectual property. He notes, for instance, that James & Wells works with leading Japanese associates to achieve the best result in the Japanese market.
Japan can be a very profitable market for New Zealand businesses, particularly in the F&B and healthcare sectors, adds Miao. But it requires careful planning for the long-term. “Products and services should be tailored specifically to the Japanese market, where consumer expectations can be very different to other export markets,”
Miao says exporters must consider everything from the packaging and presentation of their products, to marketing and development of their brands, and to their choice of Japanese business partners/advisors.
TRANS-TASMAN TIES STRONGER THAN EVER
Of course, no export stock-take would be complete without reference to our most popular export destination, Australia.
According to the ExportNZ DHL Export Barometer Australia continues to dominate as our export destination.
Mark Foy, country manager of DHL Express New Zealand, reports that export growth to that market is best reflected in the rise in e-commerce shipments that require a B2C delivery.
“Export volume from New Zealand to Australia has seen a steady growth. Our network recorded a 40 percent year-on-year increase between May 2017 and May 2018. The main driver of this growth is New Zealand e-commerce businesses selling into the Australia marketplace.”
Foy says over the past five years, the B2B market has changed and grown, allowing the expansion of business-to-consumer distribution between Australia and New Zealand. “Consumers are becoming more familiar with online shopping internationally, and those who do so are spending more online,” he says. “The changing landscape is presenting e-retailers with invaluable opportunities to exploit new markets and expand globally. These opportunities are not only for Kiwi businesses exporting to Australia, but also the US, Asia and Europe.”
The use of social media tools to boost sales and exports is also on the rise, he says.
“We predict this to be a strong marketing tool to further drive e-commerce between Australia and New Zealand.”
Foy explains that the similar business culture and political environment between the two countries mean that New Zealand businesses can market and export on the Tasman trade lane like it is an expanded domestic market.
“My advice to a Kiwi export firm looking to do business in Australia for the first time would be to explore online marketing and e-commerce opportunities to extend their networks. “And do it right with a trusted logistics partner with a global footprint.”