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Export market research

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Exporters thinking of entering an overseas market need to do their homework. Everything from product packaging to the way it is distributed should be decided in advance, based on reliable information that has been systematically gathered and analysed through a uniform approach. In other words, market research. Otherwise there is no guarantee that a would-be exporter will find a market, let alone make a profit. Research is crucial to formulating key decisions about which markets to approach and how. "The big picture is turnkey from A to B," says Lisa Goodhand, Director of China Operations with China Blueprint, a Sydney consultancy. "How do I get my products from Australia to a country like China, what are the government regulations, the legal infrastructure that supports importing my products and what are the implications, how do I communicate with consumers and understand the market for the product and what it looks like through the consumer’s eyes?" The downside is that obtaining this information takes time and often money. "It’s going to take from 12 to 18 months to go from nowhere to in-market and many companies either haven’t got the patience or the money or stamina to keep going that long before they get a sale," adds China Blueprint’s principal David Thomas. He says that culturally Australian businesses tend to think small: "You get your product in the market, get some cash flow going, keep your stock low, start with a small operation and build up. The problem is that in China none of those things are respected. They want you to be big." The lesson? Find out as much about the intended market before entry because how you enter is as important to business success as the product itself. "Market research has to be part of an overall operational plan," says Austrade’s Queensland state manager Cheryl Stanilewicz. "Intending exporters need to sit down and work out what the cost benefit will be to them. We always encourage clients to think about how they want to build their business, how an international export strategy will help them do that and how it needs to be sustainable." She recommends would-be exporters view gathering information as a step by step process. "You develop a shortlist of markets and create a structured search outline in terms of demographics and markets, then drill down as much as you can to identify opportunities and trends in that particular industry for your product or service," she says.

On your own

A lot of general information can be gathered from the internet. Stanilewicz says Austrade suggests clients search online for basic data regarding import duties, regulations, distribution channels, market size and growth, citing CIA - The World Factbook as a good souce for information on market size and demographics. But both Stanilewicz and China Blueprint warn not to rely overly on the internet as a source. "You’ve got to be able to differentiate between what is propaganda, what’s sales and marketing, what’s people with their own agenda," Goodhand says, and Stanilewicz too advises caution, especially when contacting potential buyers.

Stanilewicz says prospective exporters should look into duties and tariffs and if there are particular regulations that apply to the product they want to get into their target country. "You’d look at distribution channels that currently exist for competitors and like products or services, you’d look for trends and opportunities." She says sometimes there can be quite a lot information about opportunities generally available. "For example, there’s a lot on aged care in Japan because it’s something they’re trying to find ways to overcome. "It’s a place to start. If you do a lot of online research and you’re very methodical by the time you come to consultants for help you’ll have a fair idea of why and what it is you want to do in a particular market and how you enter that market." Apart from the internet, Stanilewicz says accounting firms such as KPMG and Price Waterhouse Coopers put out annual booklets on doing business in particular markets with information on costs of setting up offshore businesses or manufacturing facilities. Law firms also can help advise on this and identify potential issues with labour laws.

Tapping expertise

The next step should be seeking out practical advice from others with on the ground experience, at market specific seminars, for example. "We do them, state governments do them, often banks do them and you can test your ideas and thoughts with the speakers or other people who are there," she says. "Austrade offers a lot of value add for Australian companies because we have a footprint of 110 offices around the world. We can certainly give some preliminary advice and if the company decides to come over and do some investigative work themselves we encourage them to drop into the Austrade office and meet with the trade commissioner or the development manager." Commissioned research tailored to a specific product and providing competitor analysis is valuable, she says. The Queensland Government provides this service free of charge. Austrade offers stepped services starting with an hourly fee and private consultants can deliver detailed information. This would include where the market is, what the product needs to look like, in what format it is freighted, what the regulatory requirements are, what the sales model should be, how it is distributed, what it will cost and whether it’s worth it, Goodhand says. "I think the value of consultants is we know what’s important to focus on in many businesses and industries. Government agencies can provide an introduction but it’s not within their scope to take you through and register you, set up your company and get an accountant, find you some staff and then tailor your product to the market. Your research can support your case to get investment too."

The small stuff

She says when China Blueprint does research for clients they look at all the angles: economic, political, what consumers buy, how they buy and consumer influence. "The complexity is how do you get that information. Interpreting who has the most access to the market can be really challenging, especially when it’s in a different language and you have the culture issue behind it all."

China Blueprint recommends conducting focus groups to crystalise the detail of what constitutes a good value proposition, how a product measures up to local expectations, how the country of origin and perceived value are viewed and whether the visual presentation is effective. Another point that new exporters can overlook is that in some cases a competitor can provide streamlined market entry. "Do the due diligence on your competition to ascertain which ones represent a threat and which ones an opportunity. Do you have a unique selling proposition or niche product, skill or expertise that you can introduce to them?" Goodhand says. "Our brief is to find the best market for a product with the highest chance of success and tailor the message, packaging and distribution." "You have to accept that you need help, it’s going to cost money and it will take longer than you think," Thomas says. "You have to set a budget and decide what you’re going to spend on research." Is it worth it? "I can’t emphasise enough how important preparation is before you even go looking to set foot in a market," Stanilewicz says. Case study Appco Group Looking at the number of cars manufactured and driven in China, Ty Pedersen of Appco Group believed there was potential for his waterless car cleaning and polishing spray product FW1. He started his investigations by contracting China Blueprint to conduct market research to identify level of demand and point of sale. China Blueprint provided statistical data, identified business opportunities and marketing for similar products, and supplied contacts for 20 organisations for Pedersen to meet with, from trade shows to media services. The three months of research also included first using Chinese focus groups, then on the ground observation of car cleaning practice, product sales and venues, and finally Pedersen went to China to oversee a four-week trial across several locations. Appco had developed a sales model that relied on demonstrating the product to DIY customers at petrol stations but the focus groups reported that Chinese don’t clean their own cars or buy automotive products from service stations, going instead to 4S stores attached to dealerships or to detailing centres to get their cars cleaned. The extended trial at several detailing centres revealed 99 percent of users were prepaid members, a common method Chinese businesses use to secure return custom. Instead of selling FW1 to car owners, Pedersen needed to sell it to the service providers. After four weeks of product demonstrations customers began to request FW1 and Pedersen was able to embark on deals with three of the detailing centres, including a membership model, the Michelin franchise and a private label supply agreement.

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