With increasing uncertainty around global trade, we explore some top tips for entering new markets.
Last week I met with some of our customers and asked about the headwinds they were facing in the current environment. Aside from the ability to scale efficiently, the biggest uncertainty was making sense of the export landscape amid what is now being dubbed a global trade war.
The UK has always counted on strong international ties to sustain its global competitiveness. In 2017, we exported £622bn worth of goods and services globally, a 13.6% increase on 2016 (£547.5bn). Of this £622bn, the US continues to maintain its position as our number one trading partner, followed by Germany, France, The Netherlands1 and China (replacing long-standing Ireland).
Interestingly, non-EU countries now represent 55.7% of our total exports, which is a 14.3% increase from 10 years ago. In a market where the EU is on our backdoor, it appears the UK has reached somewhat of a saturation point when it comes to exporting to our closest neighbours.
Over the same period, emerging markets saw a significant uplift in trade as these economies modernised, lifted barriers to entry and urbanised their populations. For example, UK exports to China increased almost 3-fold over the past 10 years, breaking into the UK’s Top 5 trading partners for the first time.
In this lies a significant opportunity for UK businesses. Chinese consumption (goods bought per person) is forecasted to grow 9 percent year-on-year through to 2020. The result of which will see their consumer economy grow by 55%, to GBP4.96 trillion. What does this all mean for our exporters? In simple terms, it’s like adding a new consumer market 1.3x the size of the UK.
In light of these expansion opportunities, we at MarketInvoice decided to compile our top tips for exporting and entering new markets:
- Push heavily on marketing as UK-made. Britain underestimates the reputation for quality it receives globally.
- Spend time considering your product’s competitive position and price point. There is often a premium to be paid for goods produced in the UK, but this has to be relative to the average price point in that market.
- Protect your IP and trademarks in each market – it’s best to do this as early as possible.
- Get in contact with the local foreign office in the UK as they will likely have an established infrastructure, or trade connections, available to support you. Failing that, the UK Department for International Trade has excellent export guides available here, including what to look out for at Customs.
- See if you can partner with an agency or business on the ground. With local experience and language, it will make your life a lot easier, though be prepared to give away some margin.
- Ensure you have a reputable shipping partner and comprehensive insurances. Also, agree up front what happens to the goods if they don’t arrive on time and at which point ownership is transferred. This can be costly if not clearly outlined.
- Familiarise yourself with international trade documents such as Bills of Laden, Letters of Credit, ATA Carnets and Certificates of Origin. Like any document for international authorities, accuracy is key.
- Speak to your finance provider about supporting your business. At MarketInvoice, we can offer our customers insight on best practice, and also help them understand how credit-worthy their new customers are.
- If you can, lock in the exchange rate as soon as the payment date is confirmed – this will give you peace of mind and budgeting certainty.
- Be patient and take your time. It will likely take longer to crack than you think, so stay focused on establishing yourself in one geography before moving to the next.
Once broken down to its individual components, international trade is easier than you think. Furthermore, research shows that businesses who export have significantly greater growth prospects, more durability and higher profitability than companies who don’t.
If you’re looking to expand and are interested to know how we could help your business, get in touch today – just email firstname.lastname@example.org. We’ve supported our customers exporting goods & services to over 50 different countries, and in the past 12 months have financed more than 2,000 transactions against foreign debtors.
With our smart technology backed by real people, we’re here to help you focus on growing your business.
1 There is an argument that trade recorded with the Netherlands may ultimately be for non-EU countries (known as the Rotterdam effect).