Advancing to Australia: what exporters need to know

Part 1 of a 3-part series. Australia, our closest neighbour, has been New Zealand’s first port of call for traders since colonial times. Today, for the majority of Kiwi firms Australia is still an attractive, and seemingly easy, first step into exporting. But there are still traps for those who go unprepared.

Australia and New Zealand are inextricably connected. While both countries are fierce rivals on and off the sports-field, ‘Kiwis’ and ‘Aussies’ share a mutual respect; common bonds and history; travel freely and frequently across each other’s borders; and share similar business values and a love for trading goods and services with each other.

Each market is almost an extension of the other – albeit somewhat lopsided with New Zealand’s entire population (4,885 million[1]) a shade less than the State of Queensland (4.99 million[2]).

Australia’s fast-growing population (24.899 million[3]) is a magnet for New Zealand firms looking to scale-up beyond the domestic market, but not prepared to jump into more distant, and complicated, jurisdictions such as Southeast Asia. However, once New Zealand companies succeed in Australia, they often look further afield to larger markets that have increasing numbers of wealthy and discerning consumers willing to pay for our premium products, such as China.

A number of companies opt to bypass Australia altogether. Tech companies in particular have been known to head straight for the US.

And then there are export firms that use Australia as a stepping stone – often into the fast-growing Southeast Asian market or beyond to Europe.

Looking at the Australian market – while it is highly competitive, we can still count ourselves lucky that that we have such a significant, wealthy and diverse market so close to us. One that has been subject to a free trade agreement with us for many years (CER-Closer Economic Relations) and features a reasonably harmonised business and regulatory culture.

“Australia consistently offers good opportunities to New Zealand companies willing to invest in understanding the Australian consumer,” says David Powell, an Australia market specialist who, through his New Zealand-based consulting group Lost Ark Discoveries has helped hundreds of New Zealand companies cross the Tasman.

Powell highlights two of the graduates from his ‘Path to Market’ exporter workshops – Pic’s Peanut Butter and Chia NZ. He recalls being with Pic Picot, the owner/CEO of Nelson-based Pic’s Peanut Butter when he accosted strangers in Sydney streets to get them to try his product.

“Pic’s has gone from strength to strength [in Australia] through sound investment in market relationships, a great product and one of the highest price points in the segment.”

As for Chia, Powell says the company was on one of his workshops in 2016 and now has more than 400 accounts in Australia for its hydrolysed chia seed café-style drinks.

“An incredible example of the founders putting in the hard yards, listening to advice, doing research and spending time in market.”

Powell believes Australia still needs to be the first market for the majority of Kiwi firms, and that done well it can provide a strong springboard for other markets.

“I once wrote an article called ‘Blinded by China’ where because of enthusiastic government agency policy and glowing media [reports] companies get taken off track to more glamorous markets and invariably fail,” he says. “Australia is a lucrative market and worth doing right. It’s an ideal first market but it’s not a nursery.”  

As to the impact that e-commerce is having on the traditional retail landscape across the Tasman, while Australia has had significant market entries from players such as Amazon and the e-commerce market there is growing, Powell can’t see the ‘bricks and mortar’ shopping culture at the high end of the market being shoved aside any time soon.

Understanding the market

Australia is a regular holiday destination for a large number of New Zealanders, and we may think we understand how the market ticks. But we could be way off the mark, suggests Powell.

“Australia appears very similar as the proliferation of Australian television programs in New Zealand has created a familiarity/contempt thing,” he suggests. “In reality Australia is a multi-headed hydra of opportunity and defies the kind of generalisations many New Zealand businesses make.

“I’ve heard many people say; “it’s not one market, its six” – alluding to the different states and territories. I’d suggest that it’s more like 600 markets, or even more.

“Australia rewards those who can dissect it into demographic and psychographic segments,” he says.

His advice is to work hard on market intelligence.

“The adage ‘Time spent in reconnaissance is seldom wasted’ is attributed to the Australian food entrepreneur Sir MacPherson (Mac) Robertson. In my opinion anyone who invented the Cherry Ripe and Freddo Frog is already a genius but this adage to me sums up how to succeed in Australia,” explains Powell.

“Given the often miniscule investment required to fly to Australia and the propensity of Australians to provide open and honest feedback on products, there is never any excuse for New Zealanders to be surprised by the market.

“I’ve often said the failure of The Warehouse in Australia could have been averted with better market intelligence. I am a big believer in design thinking in a business and that is only successful when you have invested in truly understanding the customer and how a product matches them. “So my best advice is: Do great secondary research, but invest in getting yourself to the market, hang around retail outlets, watch and talk to consumers.

“I also believe New Zealand companies are not great at pricing. The best outcome of spending time in the market is to understand the highest market position, not the easiest.

“So often we undersell our offerings as we enter negotiations without insight.”

NZTE’s Australian Market Guide outlines some of the culture and etiquette differences between the two countries – some are notable, others are subtle.

For example:

• Business dress style varies by industry and location. For example Sydney, Melbourne and Canberra are notably more formal in dress than in other locations and New Zealand.
• Business people value good manners (e.g. RSVPs, thank you notes) and punctuality.
• Having federal, state and local governments mean that regulations and work practices vary across Australia. In some sectors, the regulatory impact can be greater than in New Zealand.
• Labour relations in Australia are generally more rigid than New Zealand. In various industries unions are a significant party.
• Australian business behaviour tends to be more litigious than New Zealand. Contracts are competitively negotiated and tightly followed.