Recent estimates place Australia as the world’s tenth-largest ecommerce market, with Australians spending around A$52.2 billion ($36.7 billion) online in 2020, an increase of almost 14 per cent on 2019’s numbers. Forecasts from analytics company, GlobalData, suggest that Aussies’ online spending will hit A$77.1 billion ($54.2 billion) in 2024.
Clearly, the domestic market offers rich pickings. But there’s a big world out there — a recent report from GroupM pegged current ecommerce sales globally at US$4 trillion per annum and projected growth to US$7 trillion by 2024, representing 25 per cent of total retail sales. Considering those figures, and in light of the ease of online trading, it makes sense for Australian companies to look beyond our borders and explore the possibility of offering their goods and services internationally.
In addition to the more than 650 million people on our doorstep in Southeast Asia, Australian businesses will find large numbers of affluent, eager consumers in the United States, Europe and the United Kingdom, among numerous other territories — not least, population centres China and India. Spoilt for choice, the first question a homegrown company looking to trade overseas faces is, where should I start?
Partly that comes down to what’s most practical from an operational standpoint, in areas such as customer service — for instance, can the company serve customers in the language of that market? The common language we share with the US and UK makes those territories especially attractive to Australian firms, as does the large size of those markets.
Judging the opportunity is critical in this decision-making. Many Aussie businesses start by exploring the bigger markets, such as the UK and Europe, where there’s the greatest potential for their bet paying off. That can be a wise approach. On the other hand, New Zealand is relatively small but it’s on Australia’s doorstep, speaks the same language, and is very easy to address.
Meanwhile, China is a large, highly attractive market — but it’s challenging as well. It’s not easy to do business, there’s the language barrier, it’s difficult to get money out, and it’s often necessary to invest significantly from a marketing perspective to drive traffic and volume to your product or service.
Like China, India has a vast population and can be lucrative. Yet entering this market may prove problematic, as international businesses have to partner with a domestic company in India, who technically own your inventory and act as the merchant of record. Many business owners are understandably reluctant to relinquish that level of control of operations.
Another matter involving autonomy is whether to sell your goods and services via an established marketplace, which tends to be the more straightforward path or to build a site of your own. Each route has its pros and cons. But if you’re gauging demand and conditions in a particular territory, if you’re not entirely certain that you have a customer base there, initially proceeding via a marketplace allows you to test in a simple, cost-effective way without investing significant resources.
Jethro Mark of The Nile, the Australian ecommerce platform specialising in children’s products, suggests fellow entrepreneurs explore international trading. “Be bold and give it a try. There are many challenges in going abroad, but the benefit of starting now is that the world is more accessible than it has ever been before,” Mark says. “Doing your research and finding the right partners to support your efforts is imperative, though. It can often be very difficult to assess potential partners at a distance.”
Making those judgment calls is especially fraught today, in the environment of Covid, when we can’t necessarily travel to meet face-to-face with prospective overseas partners. Finding a solution that protects your business from fraudulent practices and bad actors — be they suppliers, customers, logistics partners or others — can make the difference between success and failure while expanding beyond Australia’s borders.
Even when there’s the utmost trust between two parties, issues may arise. For example, companies often encounter regulatory difficulties in the cross-border transfer of funds. Today, it’s simple to send money across the world from one individual to another. The international transfer of money between businesses, however, is far less straightforward.
Whether sending or receiving a payment from another business overseas, there are regulatory checks on both sides of the transaction to ensure that the funds in question are not being used for serious criminal acts such as money laundering, organised crime or terrorist financing. This is important but can be complicated, as every country has a different set of regulations.
Nimrod Ganon of KG Electronics says settling upon an efficient means of processing cross-border payments and handling foreign exchange cost-effectively is vital. “It all comes to integration and simplicity. Business owners want to have one solution that will perform as many functions in their business as they can — we have so many platforms and third-party solutions out there and we don’t want to log in to every different solution each time we do a certain action,” they explain.
It’s important, Ganon believes, “To have a reliable payment solution that can take care of all the different currencies in one place and have the ability to use that currency to buy stock instead of losing out on conversion charges, especially in a time when the dollar changes so fast.”
Currencies can fluctuate so rapidly that in the time it takes for a transaction to be processed, the sum a payee eventually receives may not tally with the figure on an invoice. Situations such as this can put a great deal of stress on a commercial relationship.
Reducing exposure to FX fluctuations and minimising the often significant fees and charges that can be incurred when shifting funds from one currency to another is something business owners can easily lose track of. But when taking your company international, you need to be just as conscious how you move your money as you are of how you make it.