Two in three Australian brands are looking abroad to scale up. Here’s why
For a mature market of 25 million consumers, many Australian retailers and brands are beginning to look offshore for growth – a path that offers tremendous opportunity but can come with daunting challenges.
Global e-commerce logistics provider ShipBob recently released its Global State of Fulfillment Report, which suggests that 36 per cent of brands internationally will ship to new countries this year.
ShipBob’s GM for Australia and New Zealand, Guillaume Deront, a 15-year e-commerce veteran, believes the proportion of Australian companies prioritising overseas access this year and beyond is close to double that rate.
“Anecdotally, two in three conversations that we’re having with Australian brands today are about breaking into the US, the UK or mainland Europe. This is not just a small trend; a lot of the conversations right now are very much focused on global expansion.”
Exporting, he says, represents the single biggest opportunity to reach new audiences at scale, boost top-line revenue and capitalise on seasonal activities. At the same time, the maturity of the Australian market is such that not only is the growth potential limited, but the cost of customer acquisition is spiralling.
“It is becoming a lot harder for Australian retailers to rescale domestically,” Deront told Inside Retail.
ShipBob is a global supply chain and fulfilment technology platform designed for SMEs and mid-market e-commerce brands. The company was launched in the US 10 years ago and has nearly 60 warehouses and warehousing facilities spread across six different markets.
The company simplifies logistics for e-commerce brands wanting to access consumers around the world, from moving goods from the manufacturer to regional distribution centres to picking-and-packing and last-mile distribution to end consumers. Over 200 merchants or e-commerce brands use ShipBob in Australia, and there is an equal split between local brands eyeing abroad and foreign companies expanding into Down Under.
Data from Statista predicts the global e-commerce market will reach US$4 trillion this year, with an annual growth of 10 per cent forecast for each of the next five years. Australia represents 2 per cent of the global market, with the UK 16 times larger and the US 25 times. Deront says those figures show the enormous offshore potential for Australian brands.
Why now is the best time to expand abroad
“The global environment suggests that it is now more important than ever for brands to get on that global expansion bandwagon quite early in their journey, just to make sure that they capitalise on the growth potential that is there,” says Deront.
And with a free trade agreement in place between the UK and Australia and the growing appeal of nearshoring in the US, reducing tax compliance barriers and costs, there has never been a better time to explore offshore markets, he says.
Further, there are a lot more opportunities and channels to use to achieve scale. Brands can now work through Amazon and social media, including the burgeoning TikTok platform, their own direct channels, or through partner retailers. “The tools are there, the technology is there – it’s really about ensuring you have a very informed and clear strategy to expand successfully.”
He concedes it may seem intimidating to brands expanding to markets on the other side of the planet, many time zones away and a 12- to 20-hour plane flight to reach in person.
“There are a lot of areas where you don’t know what you don’t know – especially in the world of logistics, which is a very nuanced industry. It’s very important to create powerful partnerships in the market to make the whole process a lot easier.”
The most significant barriers to entry will be costs and units of economies. Shipping a parcel from Australia to the US can cost $20 to $40 – or even more, depending upon the parcel size – which might prove cost-prohibitive for many end consumers, impacting conversion rates.
“Logistics is the second most significant cost on an e-commerce brand’s profit & loss,” says Deront. “So right now, the core focus for a number of those brands is around driving supply chain efficiencies and focusing on profitable growth levers. In this day and age, everything that does not yield the right return on investment is undoubtedly being reviewed and reconsidered.”
One key opportunity for retailers embarking on their internationalisation journey is the growing trend of near-shoring, which allows Australian retailers who want to break into the US to reduce tax and duties on imported goods. A US tax rule allows inventories of high-value goods to be stored in locations that are close to the US – Canada or Mexico – and then shipped into the US (with daily limits per customer). This makes it more economical to use those countries as distribution hubs for products that are expensive to import, such as apparel and footwear.
Three key business practices to ensure a successful market entry
Deront singles out three key steps for retailers to ensure success when embarking on expanding their e-commerce business abroad…
- Understand the market, establish your business there and validate the product market fit
Brands need to validate that the product fits the market and establish a sound business case. “Simple things like recognising that while products might resonate well with Australians, be sure they resonate the same way with a new American audience.
“The evaluation process and research are paramount to success, and the ability to validate that through researching product market fits is part of a very important first step that should not be overlooked,” says Deront.
How can they go about validating the product? “The beauty of e-commerce is that it is a big but small community,” explains Deront. “Leaning on other businesses that have done things successfully in the past is a great place to start. It’s important for businesses to have the right advice as they kick off that process.”
- Localise your operations and build a strong partner network
Step two is focusing on how to get started. For example, obtaining a GST number or VAT registration can take up to six months in some markets. “There have been instances where merchants thought they were ready to go live in a region and send inventory there – until they realise they are not business- or tax-registered, and they cannot actually trade effectively there.”
For an Australian brand looking to export a product that has been successful at home into Europe or the US, for example, ShipBob will introduce key strategic partners ranging from tax compliance to product market fit evaluation to reduce the risk.
- Drive efficiencies as you scale your network across multiple geos and sales channels
Deront counsels brands to consolidate partners and suppliers, regardless of how many markets they operate in.
“Look for a single global fulfilment and shipping partner that will help you break into a new market with ease, continue to provide the level of service across all time zones, and consolidate all of your fulfilment activities and shipping activities regardless of the region or the channels that you are in.”
He also advises focusing on building efficiencies into existing operations. For example, a brand in three different markets may have contracted five different third-party logistics players for various services. The brand might only sell B2B in one market, and in the other ones, maybe B2C.
“The challenge I see with that scenario is there is minimal system connectivity, which creates many inefficiencies and overheads because the brand has to manage the relationship with all those partners. To achieve best practices in inventory management, there is a lot of stuff to understand: What stock and volume do we need to send from point A to point B versus point C, and how do we manage the fluxes?”
Put simply, reduce the overhead and stress, and find a partner that already has turn-key integrations into different providers of technology that allow proper transparency and visibility across all of your regions.
“We have robust technology that we have built into connections with dozens of tech and logistics partners through turnkey integrations with ERP, inventory management system returns, and order management software, for example. With these partners, we have created an ecosystem for brands and retailers to tap into,” he explains.
“This is something we see as paramount for the next stage of growth and scalability of that business.”
The post Two in three Australian brands are looking abroad to scale up. Here’s why appeared first on Inside Retail Australia.