Small is still beautiful…when it comes to exporting, that is – That’s the word from the Australian Bureau of Statistics, who estimate that almost 90 per cent of Australian exporters are either small or medium sized enterprises.
This confirms previous research by the Bureau which showed SMEs to be the ‘engine room’ of the Australian exporter community in terms of growth potential.
In fact, according to new research by Austrade and Sensis, Australian SMEs are now becoming a regular part of the exporter community. According to Austrade/Sensis, around 15 per cent of SMEs now export which is up 2 per cent on the same period last year despite the strength of the Australian dollar. In fact, this percentage has remained pretty stable – within the 12 to 16 per cent range – over the past couple of years. The bottom line is that you will find Australian export potential in the grass roots of Australian business in the suburbs and in regional Australia as well as amongst the blue-chip corporates at the top end of town.
So who are our small players? Where do they live, what do they do and where do they sell to? First, let’s look at location, location, location. Despite the impact of the resources boom, with the boom export states of WA and Queensland charging ahead, on the SME side it is the manufacturing and services heartland of Victoria that leads the way on 19 per cent. In terms other states and territories, 15 per cent of exporters in New South Wales and the Australian Capital Territory export, with 14 per cent in the Northern Territory (the Top End always performs well in these polls), 13 per cent in Western Australia, 11 per cent in South Australia, 10 per cent in Queensland and 9 per cent in Tasmania. Second, what about industry? Wholesale trade leads the way with 37 per cent of all its SMEs involved in exporting.
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This is not surprising as wholesale trade typically has many exporters and importers involved in the distribution game. Wholesale trade was followed by manufacturing on 30 per cent and business services on 21 per cent. Less prominent was retail, hospitality and building and construction. So where do the small exporters go? Not surprisingly, proximity and language/business culture are important factors. Our nearest neighbour, New Zealand, is a destination for 36 per cent of all SMEs who export, followed by the USA on 29 and the UK on 22 per cent. Better macroeconomic news from Europe has given the continent a bit of a boost. Accordingly, many small Australian exporters now have ‘Eurovision’ (as opposed to ‘Europhobia’ a year ago) with 14 per cent nominating Europe as a destination.
In Asia, markets where Australia either has or is negotiating a free trade agreement (FTA) are prominent. Singapore is a market for 11 per cent of exporting SMEs, China for 9 per cent, with Japan and Thailand on 7 per cent (even the English-speaking USA market has improved as an export destination for SMEs since the FTA has been in place). China’s prominence in the top six most favoured destinations for exporting SMEs shows that you don’t have to be a big fish like Rio Tinto or BHP Billiton to succeed in the Chinese market.
Broadly speaking, what do our SME exporters look like? For the most part, they are likely to be more medium than small, more metropolitan than regional and more likely to be run by a male born overseas. And whilst the blokes still outnumber the women, there are a growing number of female-run businesses in outer-metropolitan areas which suggest a ‘Kath and Kim’ effect occurring in the Australian suburbs. After all as Kim famously once said "exporting makes you effluent".
In terms of age demographics, given that it takes a while to get established, SME exporters are also more likely to be ‘baby-boomers’ than generation Xers or gen Ys, and most have 15 to 20 plus years experience in the export game.
Do they make a buck? Previous research shows that exporting, on average, helps the bottom line. The survey results show that SME exporters, on average, are more likely to have an aggressive expansion strategy than other SMEs. They are also more confident than non-exporters and are more bullish on profits, wages and employment.
However, there is still much more to do to get more SMEs in the export game. Despite the rewards on offer, there is still a low ‘intention to export’ in Australia amongst SMEs. What are the major barriers? It is not a matter of labour costs but labour shortages. A major reason cited by small business for not entering export markets is the lack of skilled staff with overseas sales experience. They are willing to pay good wages, but are keen to have well trained and/or experienced export managers. This suggests that training programmes – like the new exporter development scheme are on the money in terms of small business needs.
However, it is not all bad news. According to the research, there are some positives that have helped SMEs get into exporting. SME exporters say they have been helped by improved market access through tariff reductions and the new free trade agreements. In addition, improvements in technology (through recent developments in e-commerce) have made getting into export markets a lot easier for them.
So expect more action to come on the SME front. This is good news as more SME export action means not only more growth and more profits for the businesses concerned but also more jobs for Australian workers at higher rates of pay. The ‘small is beautiful’ phenomenon also forges stronger links with other nations right across the Australian community.
Tim Harcourt is Chief Economist of the Australian Trade Commission and the author of Beyond Our Shores.
