Results from the 2009 DHL Export Barometer reveal that new exporters are thriving in the current global economic climate, recording the biggest jump in orders in the last three months, and the highest confidence levels – twice that of exporters that have been trading for more than 20 years.
Gary Edstein, DHL Express’ senior vice president for Oceania, says this is largely because new exporters tend to be small businesses that are more nimble than their seasoned counterparts.
“They’re identifying the opportunities, they’re a lot smaller so they can react faster, and my belief is that they can manoeuvre from one market to another whereas a larger exporter with deep roots in Asia or the USA can’t respond to such a significant crisis as quickly,” says Edstein.
The results showed 64 percent of new exporters, those exporting for less than five years, expected an increase of profitability in the next 12 months against just 34 percent for established exporters of more than 20 years.
Edstein was pleased with the amount of optimism shown in the results, particularly with regard to those smaller exporters: “I’ve always found that Australian exporters are quite resilient. I look at the large ones that continue to perform but it’s good to see the small exporters seem to be more positive this time around.”
Middle East, not Asia
Exporters also turned toward the Middle East as a market destination, with 56 percent of respondents confident of increasing sales to the region in the next 12 months. China slipped from first to fourth position on the ranking, falling nine percent from last year.
New exporters saw the most opportunities in the Middle East, Europe and Africa, whereas seasoned exporters still looked to Asia for sales.
“The Middle East may be a little more protected regarding this financial crisis,” explains Edstein. “It has hit hard the USA, Europe, within Asia, but the Middle East, with its wealth in oil, seems to be a bit more protected. It’s a strong market for exporters.”
Money too tight
Exporters also expressed a lack of access to trade finance as a barrier, with 60 percent indicating difficulties. Two in three exporters use advance payment as an alternative to finding finance.
“It’s hard to get finance these days and banks are being a little bit more cautious as to what they lend out,” notes Edstein.
He says Austrade’s Export Market Development Grant (EMDG) scheme was a key confidence booster, especially for new exporters in difficult markets. The Barometer findings revealed that more than three quarters of Australian exporters supported the use of grants to assist with their exporting activities.
“The Barometer shows that new exporters are reluctant to enter Asian markets. China and India offer tremendous opportunities but also provide significant barriers and export support programs especially those directed at new exporters are critical,” says Edstein. “The initial support is good when you’re trying to build your market.”
Future of Australian exports
Edstein says export confidence was well founded, with volumes due to pick up after the global financial crisis affected demand late last year.
“Inventory levels are way down because when this GFC hit last September, a lot of businesses decided to reduce their inventory holding,” he explains. “They now need to replenish those stocks.”
Other elements such as the fluctuation Australian dollar may pose a challenge, but the outlook is mainly positive, he believes, with online exports making businesses more flexible and quicker to react to opportunities.
“Australian exporters seem to be using e-commerce and they’re sourcing new markets, not just the traditional markets. They’re being smart and using the power of the web to export,” says Edstein.
“Seasoned exporters have traditional markets and sometimes they rely too much on those traditional markets whereas these new exporters seem to be more savvy and more flexible and they can respond quicker. With this huge opportunity online they can go to the world and with our type of distribution capability we can take them to any part of the world.”
He says lessons from the Asian Financial Crisis will hold Australia in good stead for this GFC: “Australia seemed to weather that quite well. What we saw back then was a similar pattern where exporters moved quickly from one market that may have been deteriorating, to another market opportunity.”
And even in this global crisis there are opportunities, he adds: “With this being a global financial crisis, which markets have those? What we’re seeing in this survey is the new exporters see the Middle East and Africa and to a lesser extent South America as places with opportunities.”
The DHL Export Barometer collated responses from more than 850 Australian exporters.
