How Online Export Markets Can Fuel Business Growth
With Brexit and an unstable pound causing economic uncertainty, has your small business considered overseas opportunities?
Imagine a way of earning more from your customers without sending them a bigger bill. Or generating more profit from your products and services without improving your team’s productivity or performance. What about looking like better value to buyers without a hint of discounting or changing a word of your marketing campaign? Does this all sound too good to be true?
Welcome to the world of exporting
The plummeting pound in recent weeks has given British companies trading overseas an unexpected boost. All the economics textbooks will tell you that overseas buyers looking for a good deal are now getting more pounds for their dollars, Euros, or even pesos today than this time last year.
As a result, British goods and services suddenly look like great value compared to like-for-like goods and services from other countries. But there’s another benefit that’s talked about less frequently. Exporters often bill their clients in the currency of the country they are exporting to rather than sterling.
So, imagine a British business that’s been trading overseas for some time and charging clients in dollars, Euros or whatever its client’s home currency is. That British exporter doesn’t have to drop its prices just because of the fall in the pound. But the benefit to the British exporter of each sale has been magnified when it comes to exchanging those foreign revenues back into sterling.
For example, a $50,000 contract won by a British firm in the United States this time last year would have been worth about £32,500. Today, that same dollar contract is worth closer to £41,000. It’s the same story if that British firm had been trading with a European customer and invoiced in Euros: the contract would have increased in value from about £36,500 to £45,000. The terms and conditions wouldn’t have changed. But the economic and political context most certainly has.
In the last year, the British economy has grown at a healthy 2.2% annual rate, better than the Eurozone’s 1.7%, for example. But worries on the international money markets over Britain’s exit from the European Union have made holding or buying sterling look like a risky bet. Currency traders are factoring in what they fear may happen to the British economy when Brexit actually happens: at the earliest in the spring of 2019 or potentially stretching into the 2020s if exit negotiations are prolonged.
Right now, it means that whether you’re trading in the Chinese Yuan, Hong Kong Dollars, Danish Krone or the Mexican Peso, goods and services exported from Britain pay back more to British companies. The other side of this economic equation is that it’s a tough time for British importers. They’re having to burn more pounds to bring in the same goods from overseas because sterling buys less than it did even a few weeks ago.
So if the hot economic opportunity is around exporting, where in the world do you start? Back in the days before the internet, exporting meant overseas travel, trade missions or even the expense of opening an international branch office in a target territory.
Today, thanks to email, conference calling, e-commerce platforms and online banking, trading overseas can begin digitally and be executed remotely. Social media, online search and even instant messenger apps have created new ways to reach a target audience with organic content or paid promotions. But your customers’ experience of the digital world depends on geography.
Research and accurate data are key
Want to export to India? Then plan a sales and marketing campaign that puts mobile first. This is a market where only 27% of digital life happens on desktop devices. Or think Google and Facebook dominate online search and social media everywhere in the world? You need to read up on Baidu and the instant messenger Tencent QQ if you are interested in developing business in China.
There’s a good chance that many UK businesses will think first of English-language export markets: the US and Canada, Australia and New Zealand, South Africa, or even our closest neighbour, Ireland.
The first step is to see what advice – or financial aid – is available from the UK Government to help you get started.
You’ll find a handy starter’s guide here.
There are plenty of considerations: from tax regimes, export licences for certain products, and product compliance standards that might vary from country to country – or even between states in the US.
Government advice is also available to help you understand the political and economic risks of trading in some countries.
Exporting beyond the EU
But let’s take three non-EU examples and sketch the digital landscape by drawing on data that’s been compiled in by AVG Business.
- The US accounts for about 17% of all UK exports – so a door may already be open to your products and services.
- 87% of the population are online – making the online market worth a potential $13 trillion.
- Google has an 80% share of the online search market – but don’t ignore Bing if that’s what your customers use to find your products and services.
- About 41% of the population use Facebook – again, if this is where your customers are, great! Otherwise you may need to look to other platforms to make contact.
- The speed of internet connectivity varies widely across North America, from the national average of 14mbps to about 20mbps in Eastern seaboard states like Delaware and Rhode Island. The biggest problem is the “last mile” of connection to homes and businesses which relies on outdated infrastructure. So if you’re offering something that will need to be downloaded or accessed over the web, think about your customers’ download speed.
- Australia and neighbouring New Zealand are ranked among the top 15 countries for “ease of doing business”, according to the World Bank. Make it easy on yourself, why choose a more challenging country?
- There are more Brits in Australia than any other country – so you might be able to tap into a natural affinity with your home-grown brand.
- 93% of the Australian population are online – making the online market worth a potential $1.3 trillion.
- Google has an 92% share of the online search market.
- 41% of the population use Facebook – the same proportion as the US.
- But the internet has become a political issue in Australia after figures showed the country had slipped from 30th to 60th in the world for internet connection speed in the last three years.
- The UK Government describes South Africa as a “sophisticated and promising” market for British firms with future growth forecast.
- 49% of the population are online – making the online market worth a potential $174 billion.
- Google has an 91% share of the online search market.
- About 30% of the population use Facebook.
- This year the South African Government allocated $180 million to roll-out broadband across the country to increase connection speeds from the current 4mbps average. This may widen the online population too, and potentially your customer base.
Don’t ignore the noise!
Just comparing those three non-EU markets highlights key considerations for digital exporters: crucially, the role of search and social channels, particularly Facebook, as potential routes to market. The data also highlights vast differences in the scale of the digital market in different countries: from billions to trillions of dollars.
Of course, there are no guarantees that the recent downward trend for the pound will continue – offering the kind of exchange rate gains that existing exporters are benefiting from. But as the old saying goes, if an opportunity knocks, don’t ignore the noise.