Exporting: An entrepreneurs’ guide
The names behind global brands such as Hotel Chocolat and Nails Inc on the ups and downs of growing internationally and what start-up entrepreneurs should watch out for...
How should businesses tackle exports? That was one of the central questions at the Telegraph Festival of Business this week when leading entrepreneurs and industry names came together in a panel discussion to share their advice, exports success and “nightmare” experiences of trading overseas.
Thea Green of Nails Inc, Angus Thirlwell of Hotel Chocolat, Andrew Graham of Graham and Brown, and Ed Clarke; managing director of UK operations for FedEx, weighed in on the ups and downs of exporting products and services internationally and how exports had helped their businesses to scale up.
Coinciding with National Exports Week, UK Trade & Investment (UKTI) deputy director, Joanne Freeman, was also on the panel offering up some humorous examples of what NOT to do when looking to export.
Read on to find out what exports insights the panel had to share:
How much of a difference has exporting made to your business?
Thea Green: “We waited quite a long time. Nails Inc. is 15 years old so it took us 12 years before we started exporting. There were lots of opportunities for us to do things in the States early on but we didn’t because we were very nervous about it. We were nervous about the costs of investment, protectionism etc. I’m glad we did [wait], we waited until we had the infrastructure. The reality is that if you’re successful, you will then have to ship by sea and air and there are other challenges. It’s much more beneficial to wait and [become a more] established brand.
“The opportunities are phenomenal; you can’t grow credibly without going global.”
Andrew Graham: “50% of our sales come from overseas so we’ve only just scratched the surface. I’m always reminded that the world’s population live outside the UK. We export to the US, China, North America, Western Europe, Moscow, Dubai, we’re in a lot of the major markets but we still have less than 3% of the overall world market so we’ve got lots of opportunities.
“Build a strong business at home before you export”
“You have to build a strong business at home and a brand [before you export]. When things go wrong overseas, you want to have a strong, secure business in your home market to fall back on.”
On the best export markets
Joanne Freeman: “Do your research, it really takes time and have patience to carry it out. Make sure you’re as prepared as you can be in the UK.”
Angus Thirlwell: “You either go for an established market where you face more competition or markets that are new to your products where you have an advantage. We preferred to go into established markets because we identified that we had some differentiation to everyone else.
“We’ve had most success where we’ve really tried to do something different. The best was Copenhagen. It’s a country with a great foodie culture […] We created a cocoa roaster there and we launched a cafe bar there as well and we had the largest boutique there that we had opened to date. It looked like a hotel from the outside.
“The advice I would give is don’t necessarily repeat exactly how you did it [launched the business] in your home market because the market moves on and consumers move on.”
“Top exports markets are the US, Australia, New Zealand, Canada, and South Africa”
Ed Clarke: “We recently published The Great British Export Report and found that the top exports markets at the moment are the US, Australia, New Zealand, Canada, and South Africa. South Africa may seem surprising but it’s quite a good place because of the time zone. If you’re looking to build out a global network having an exports market that’s in the same time zone as the UK can greatly reduce your costs, especially if your business needs to give technical or customer service support.”
Andrew Graham: “You’ve got to look at China; it’s the second largest economy in the world. If you start exporting then China needs to be on the agenda but I wouldn’t go there first.”
“China needs to be on the agenda”
Ed Clarke: “From our report, we actually found that China was the most challenging market globally.”
On exports success
Andrew Graham: “It happens by chance a lot more than you would think. In America, we just started with sales guys, a very good one happened to get us into Home Depot and they had 100 stores at the time. We’ve gone digital first more recently so our products can be bought from all over the world.
“If you start with what can go wrong, you’ll never export”
“I never focused on the barriers to entry, I always focused on the customer – I got an order and then worked out how the hell we were going to ship it. If you start with what can go wrong, you’ll never export.”
Thea Green: “Nothing beats going [to your desired export market], if you’re not clever enough to spend time in that market, then you’re not ready to export. If you say to yourself I can’t afford two weeks in China, that means you’re not ready to go to China. That’s always been a good test – are you prepared to send someone to a country not focused on your home market.
“Exporting is tiring but it’s a great privilege. Understanding global markets, cultures and working out pricing structures, competitors, you get to start again in every country.”
“If you can’t afford to spend two weeks in China, you’re not ready to export to China”
On sourcing overseas distributors and retailers
Thea Green: “It’s not one size fits all. With the States, it didn’t make sense for us to go with a distributor; we’ve done direct selling into the US but then when it’s other countries with fairly complicated trade, it’s best to go for retail.
“We went with Sephora [major beauty chain and online cosmetics store] in the US because they’re very good at helping young brands as they focus on ‘newness’ – they allowed us to run the business from the UK and didn’t expect us to have people on the ground in the US. A lot of other international markets will expect you to have an office on the ground.
“Getting distributors is a nightmare. It’s been so painful. It’s going and getting on planes constantly. We had an internal motto that if we’re not going to spend time in a country, two to three weeks, and going to see every distributor then we’re not clever enough to [export there]. You’ve really got to go out and meet everybody. 80% of distributors are God awful, 20% are good but really hard to find.”
On overcoming language barriers
Andrew Graham: “Think global, act local. Every one of our businesses around the world is run by a local person who helps us with the interpretation of the language and the culture. I only speak English but I now have a strong sense of intuition depending on what country I’m in. What I’ve always got is a local person who understands the local market place.
“Think global, act local”
Ed Clarke: “Do simple things like bring people in to your team with language skills to give your business a head start for new markets.
“You can also lean on entrepreneurs who have already got a global presence and [can pass on relevant contacts]. Rely on other companies and networks.”
On export “nightmares”
Andrew Graham: “At the moment, Russia is causing us quite a lot of problems. We built a reasonable-sized agency in Moscow and obviously the conflict with Ukraine has caused issues. We have a lot of products ready to go. It’s not a personal nightmare but we’ve probably invested in a year’s worth of product development and new printing equipment to break into Russia and it’s all come to a grinding halt because of something that we can’t control. We’re just going to have to wait.”
Thea Green: “We started exporting about three years ago, probably one of our biggest challenges of the last year or two is that we’ve had to do a huge amount of product registration before we launched into specific countries. For example, we’re just about to launch in China, we’ve had to spend £1,000 registering each skew, it’s a huge cost and it’s probably going to take us two years to find the right partner for different Asian countries. It’s not been a quick win in any shape or form; we’ve probably spent around £100,000 on product registration.”
Ed Clarke: “Protectionism is the biggest issue. A lot of countries look to protect their own industries by making it difficult to bring in certain products and items. That’s not really what we want for free trade, exports and growth, that’s one of the hardest things to negotiate.”
“Protectionism is one of the hardest things to negotiate”
Angus Thirlwell: “It’s all the red tape and barriers that are put up. When we first started exploring international, we wanted to send out champagne truffles into America and we found that the FDA classified them in the same banner as explosives and high alcohol. They were taken away for special treatment and that lasted a couple of years.
“And then when we started opening our locations in Copenhagen, we found that our products came under a ‘fat tax’. So even though we use a lot less sugar than anybody else and we’re trying to balance wellness and enjoyment of good chocolate, irrespective we were slapped with fat tax which adds a lot of costs to what we’re doing. Arguably we could have known about the fat tax if we’d researched more thoroughly I suppose.”
Joanne Freeman: “A story from my own experience; I was head of the UKTI team in India and we had a lot of trade missions with people coming to meet buyers and potential customers. We encouraged people coming on the missions to do their research before they came.
“On the first morning this guy stood up and he said: ‘I haven’t done any research, I’ve just decided to come on the spur of the moment. […] I’ve heard that there’s now a growing middle class in India, they’ve got a lot of money to spend that they spend on beauty treatments so my product is a range of tanning salons. I intend to open franchise tanning salons across India.’ My face dropped, and I had to explain to him that one of the best selling face creams in India is called ‘Fair and Lovely’. The penny dropped that he had spent £1,000 on flights for the week, hotel costs, and his costs to his business; it was an expensive lesson to learn.”
For more information and advice on exporting, click here.