April 20, 2012
Welcome to part two of Shipwire’s multi-part blog series: Expanding into Asia-Pacific. In this series we’ll look at the different Asia-Pacific markets, what makes them special, and how to start expanding your business into them with the greatest success. Today, in Part 2 of the series, we look at Australia.
Now that your business has outgrown the local market, where do you go for growth? If you are already serving North America and Europe, where do you find a similar market with an advanced economy with room for your business to grow?
Australia, that’s where.
Underserved by North American Business
According to the UN, Australia is a five hundred and sixty billion dollar market for consumer goods that’s largely underserved by North American business. It’s a mature market with lots of disposable income, and ignoring Australia is the equivalent of leaving money on the table. Another benefit of expanding into Australia is that due to international trade patterns, once you are set up to serve the Australian market, you already have access to most of the infrastructure to ship your products into the Chinese market, which gives you a leg up on your next step after Australia.
The Australian Consumer
The Australian consumer is much like the consumers you may be used to in North America or Europe, only wealthier than most. Also, while it would be wrong to underestimate the differences between the Australian market and North America, there is a vast amount of information available in English on the Australian market. According to marketing documents in Melbourne’s Victoria University, the Australian market may be the most studied in the world. According to Credit Suisse, Australia ranked second only to Switzerland in average adult wealth in 2011, and neither the United States nor Canada made the top ten. Meanwhile, the IMF is predicting a sustained growth in the Australian Gross Domestic Product of over 3% per year in the period 2012-2016. Given that Australia’s GDP is in the neighborhood of 1.5 Trillion dollars and that the consumer market makes up approximately a third of it, this means that according to the IMF’s figures we can project that the Australian consumer market is going to increase by approximately 17 billion dollars per year for each of the next five years – or an overall projected increase of approximately 85 billion dollars. It’s a growing market.
Where Does Your Business Fit in?
There is one area in which the Australian consumer market offers a particularly big opportunity, though; according to Frost and Sullivan, they are at least three years behind the US and UK in the development of ecommerce – but that’s still a 12 billion dollar a year online retail market even with that three year handicap. Note that despite their high average wealth, surveys show that Australians still cite price as a major factor in driving their online purchasing decisions.
One reason that price may be so important to the Australian consumer is the effect of distance. Not only is Australia a large and sparsely populated country, it is also at the end of a very long supply chain for most North American suppliers. Even products that are made in Asia may be shipped first to North America and then fulfilled from there to the Australian market. That’s a lot of shipping, and it drives up the cost of everything: particularly in a country with a relatively small domestic manufacturing sector. Being able to overcome the high costs of shipping to Australia means winning a whole lot of new customers.
An Opportunity for Online Retailers
Despite the costs of shipping, Australians are still spending almost 40% of their online consumer dollars on overseas rather than domestic sites. Many major Australian retailers have been slow to move into the ecommerce space, and this delay on their part provides an opportunity for foreign merchants who are willing to move quickly into the market openings this provides.
Another advantage of the Australian market lies in the cultural and social similarities to Canada and the United States. While one cannot ignore the differences, the shared language and similar legal foundations make it much easier for businesses seeking overseas expansion from North America to move into Australia than into other countries where there are fewer legal and linguistic commonalities. It’s a growing market with an advanced economy and wealthy consumers and no language barriers to entry. If you are looking for a new market for your business, you could find a lot worse places to look than Australia, and that’s where Shipwire can help.