World of Opportunity - Sponsored by WorldFirst by Elite Business Magazine

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JULY 2018

WORLD OF OPPORTUNITY

WELCOME

n a climate that’s currently filled with uncertainty, concern and rumour, UK business leaders are constantly being updated with various reports about the risks surrounding their companies. But what about the opportunities? Those beyond Britain? We’ve spoken with a series of entrepreneurs about their experiences of operating internationally and started at the best possible place – the beginning. If you plan on launching your company abroad, it stands to reason you won’t have all the answers, which is why we’ve questioned those who have been there and done it on what they believe are the most crucial things to consider in order to successfully secure a footprint overseas. With everything from costs, strategies and being honest as to whether the market actually wants your service, you should have everything you need to get the ball rolling with an export plan. There’s an incredible amount of data doing the rounds on what seems to be a daily basis surrounding Brexit and the UK’s future. So we’ve crunched the numbers and rounded up the key figures in one infographic to bring you up to speed.

Setting up shop overseas may seem like an uphill struggle and, while we’re by no means saying it’s easy, online has helped the ambitions of entrepreneurs to open overseas and achieve sales. Indeed, we’ve heard how some business owners haven’t even had to set foot on a plane to attract international customers thanks to the internet. As one leader puts it: “Cross border e-commerce is the backbone for our ambitious business growth.” So we’ve covered what to consider when growing abroad and how the web can help your ambitions but the next question is where should you go? China is a solid destination for its market opportunity thanks to a love of Brand Britain as well as the spending power possessed by local consumers in the country. Finally, some things you’ll hear on the grapevine about export will be true and others the work of fiction. We’ve done some myth-busting to break down what you can expect to hear when setting out overseas to give you a head-start on what’s true and what’s false. Happy exporting!

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Follow the leaders Growing a company overseas can seem daunting, so we’ve secured first-hand pointers from business leaders that have successfully expanded beyond the UK “It’s important your website talks directly to your new market. Having a platform that sells in pound sterling isn’t going to entice a US audience. Speak to your new audience by pricing products in their national currency and, if you can, make the shipping, returns and delivery process as barrierfree as you can.”

Richard Valtr is the founder and CEO of Mews, the hospitality software provider

Niamh Barker, founder of The Travelwrap Company, the cashmere wrap retailer “The most important thing for us was making sure that customers around the world have a positive journey with us, from when they order an item to when they receive it. It’s vital not to rush into making decisions and to look at all the options when it comes to order fulfilment.”

“Have a very clear business plan with a clear export strategy. Ensure your value chain can accommodate an importer-distributor margin and remain market-led if it’s a premium brand proposition. If you’re serious about export, having credibility is key, otherwise you will not attract the right partners.”

Mark Dawkins, co-founder, Langley’s England, the gin brand

Tom Jeffrey, e-commerce manager at Jules B, the luxury clothing brand “Research into the market size, native languages and customer behaviour in your desired location are important to think about. This will ensure you understand your market well. Also, your financial situation – make sure you’ve got budget and resources to expand in the way that you want to.”

Ashleigh Hinde, founder of Waldo, the direct-to-consumer contact lens brand www.worldfirst.com

“Seriously consider whether or not your product or service has a potential customer base in your new market. While you may be successful in your home country, this doesn’t always translate to success overseas. Put simply, if there’s no need for your service or product, and you do not undertake due diligence on a new market, you’re doomed to fail.”

“It’s very unlikely you’ll be an expert in the country you are doing business in, so always try to find a local partner that understands the landscape. This is a strategy we’ve pursued to great success in South Korea and Japan.”

Omar Rahim, CEO of Energi Mine, the energy company

SUPPLEMENT WORLD OF OPPORTUNITY TITLE

Of UK-based businesses expect their overseas trade to increase over the next year

Is the amount exported UK goods and services will increase by 2020 - which will double by 2030

The value of international imports in April 2018 – a 2.5% increase from last year

of London-based SMEs make a foreign transaction each month, followed by 30% of the South East and West Midlands

The value of international exports at the start of Q2 in April 2018, showing an increase of 6.6% year-on-year

of European businesses are moving operations out of the UK following Brexit – down from 15% in 2017

of UK SMEs export to Western Europe, making it the most popular destination, followed by Central Europe, the Nordics, Eastern Europe and the US

SMEs invested in exports in Q1 2018

of small businesses are positive about leaving the EU

of UK SMEs trade internationally in Q4 2017 – down from 52% in Q4 2016

Source: Bibby Financial Services, UBS Evidence Lab, WorldFirst, HM Revenue & Customs, HSBC/gov.uk

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Online:

An overseas opportunity

The power of online shopping and communications means companies can now cross countries at the touch of a button, so we’ve spoken with the leaders who did exactly that with their businesses to head overseas

he UK high street has been hit hard throughout 2018, with a seemingly endless list of retailers including John Lewis, Toys R Us and House of Fraser announcing store closures. Comparatively, online retail is surging. An IMRG Capgemini sales index revealed that purchases online spiked by 19.4% year-onyear in May 2018. Commenting on the study, Andy Mulcahy, strategy and insight director at IMRG, said: “Growth for the online retail market has been exceptionally strong so far in 2018, with May’s result being the highest

for that month in eight years. It’s becoming increasingly clear that shoppers are favouring online channels over physical ones to a greater degree than they used to, which is accelerating the pace of change for multichannel retailers.” Of course, online shopping doesn’t just support consumers and make their lives easier, it simplifies things for retailers in many ways, particularly when it comes to expanding the business and operating overseas. Indeed, rather than physically visit countries, look at locations and property options, introducing an

online store into a new market can speed up the process. Jules B, the luxury clothing brand, is one such company that didn’t even venture overseas to explore markets before selling in them, it just went in for the kill, according to Tom Jeffrey, Jules B’s e-commerce manager. Explaining why the move outside the UK was made, he says the opportunity to build the brand was too good to pass up. “Selling outside of the UK meant we could expand our potential customer base and bring our unique mix of brands and styles to more people,” Jeffrey details. “These things always

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take a lot of work and figuring out to begin with but it’s been a worthwhile process and has increased brand awareness for us in a way that couldn’t have happened if we were only selling in the UK,” he says.

“Without having to physically leave the country, we’ve reached a point in which international orders represent 20% of our business and this figure is constantly increasing.” When assessing where to launch, the brand turned to Google insights and keyword tools alongside paid advertising to weigh up the best options suitable for its growth. And although there were challenges, they’ve been overcome and have literally paid off. Jeffrey says: “With the tools and technology we have access to now, selling online is certainly the easiest way to take a business overseas and make that expansion. Without having to physically leave the country, we’ve reached a point in which international orders represent 20% of our business and this figure is constantly increasing.” In terms of the approach to achieve sales, Jules B is open-minded with the method it chooses, although online marketplaces have both been valuable. “We look at all options, from Amazon and affiliates to apps and third party platforms, to help us build the Jules B brand and generate traffic to our site,” says Jeffrey. “We already use both Amazon and eBay to drive sales and have found this to be a successful strategy.” China is one such market that businesses should pay attention to closely if they want to branch out to new territories. According to PwC, the professional services firm, the Far East country is the biggest e-commerce market with online sales of $307.4bn in Q1 2018 – that’s a 35.4% rise year-on-year. Langley’s England, the gin brand, secured a deal to enter Asia in 2018 and cofounder Mark Dawkins said he’s keen to achieve the success there that it has in Europe and the US. He believes that an international presence is needed in order to be a true brand. “40% of our global sales are currently from the UK but we have a clear three-year plan to reduce that reliance to 20%, whilst still doubling the UK sales,” says Dawkins. He notes that export sales were crucial to let the business reinvest in its marketing plan to scale abroad.

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Interestingly though in the case of Langley’s, achieving online sales abroad hasn’t been as key for the business as it has for Jules B. “Our brand is available on many online retailers and we have a good online presence via our non-commercial website and social media platforms but importers do not buy from their brand partners online and we’ve noticed that not many overseas consumers do either,” Dawkins says. Focusing on Amazon specifically, it hasn’t been particularly prominent for overseas sales either but does have its benefits. “It has been very good for us in the UK and if you are a successful performer with a good sales performance on Amazon it does prove the saliency of your brand and that does make import partners sit up and take notice,” he adds. “It has a similar impact to having good sales in multiple grocers these days.” Elsewhere, Niamh Barker, founder of The Travelwrap Company, the cashmere wrap retailer, has been able to enter most foreign markets with the power of the internet without travelling to them in person. “For our overseas audience, our signature product, Scottish cashmere travelwrap lends itself well to an online audience,” Barker explains. “Our brand emphasis on the quality, craftsmanship and British heritage provides reassurance and reduces barriers to purchase for overseas customers.” With that product reassurance and brand exposure overseas, Barker feels the business expanding outside of the UK has been low risk. “As customers spend more and more time shopping online our strategic growth plan continues to be following our customers anywhere in the world. Cross-border e-commerce is the backbone for our ambitious business growth.”

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Beyond EU borders What the UK’s SMEs may have thought of being a slow death with the triggering of Article 50 has resulted in increasing profits from the Far East

here are no second thoughts about China being the largest economy on a purchasing power basis. Whether it was British beer, Whittard tea from Chelsea or British pork, China seems to have taken a shine to goods manufactured in Blighty. And the UK was always viewed as a gateway to entering the tech industry with the increasing startups. China’s interest in the country was shown when it issued the first overseas sovereign RMB bond in 2014. This means endless opportunities for UK-based companies. As the Brexit countdown ticks even louder with each passing day, business owners widen their gaze beyond the EU over to the Far East. Post-Brexit vote, the UK’s trade increased by £0.6bn with countries outside of the EU and declined £1.2bn with countries inside the EU in the first quarter of 2018, figures from National Statistics show. While businesses believed that failing to reach a deal with the EU could

be fatal and the single market access is crucial, SMEs are now confident about expanding and are being able to produce profits from overseas. In fact, 60% of medium-sized business leaders plan to increase investment in exports beyond the EU in response to Brexit according to research by Mills and Reeve, the national law firm. The study based on a survey of 500 companies said that despite an unstable economy being foreseen, businesses are feeling bullish with 83% of them planning to increase their turnover this financial year. But Brexit is not the only reason for expanding in other countries. Many Asian investments were being directed to the US until now. But figures by Magister Advisors, the M&A advisory firm, witnessed a change when Asian investors turned their back on America after Trump’s punitive trade tariffs. This would mean that foreign investment from Asia would scale up UK businesses far faster.

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An example of a British business thriving in the Far East is Jaguar Land Rover, which racked up export sales in China after it opened its first engine plant in the country and is to be one of the largest exporters to the market. Indeed, while the full financial year ended March 2017 saw the firm’s retail sales up 16% year-onyear, China dominated the growth with a 32% sales spike over the period. That’s more than the 24% in North America, 16% in the UK and 13% in Europe. “We continue to make encouraging gains in key markets such as China and North America,” said Andy Goss, sales operations director at Jaguar Land Rover. This was seen in other companies as well. For instance, the sky-rocketing demand for luxury commodities led to a 4% increase in sales last year for Burberry, the British clothing brand, and much of it came from China. Similarly, Intertek, the product-testing company, said in its annual report that China, Vietnam, India and Hong Kong are main markets. Another business witnessing an upward growth was BP, the UK-headquartered oil and gas company. Its report said that energy consumption in China rose by 3.1% in one year making it the largest growth market for 17 consecutive years. It

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just goes to show how closely the fortunes of UK firms can be linked to Chinese markets. But export does comes with its challenges. For many exporting SMEs that sell in foreign currencies, foreign exchange risk is the most cited challenge and many see either gains or losses fluctuate due to exchange rates, given the depreciation of the sterling. According to Civitas, an independent think tank, SMEs find finance to be another mountain to scale when it comes to expanding abroad. But despite these challenges, figures from global currency company WorldFirst’s ninth quarterly Global Trade Barometer showed that of the 1,000 SMEs surveyed, one in four are looking to export to a new country in the next quarter. Of the ten markets that saw the greatest growth in payments from UK SMEs in the first quarter of this year, seven are outside of the EU. These include — Turkey, Norway, Morocco, Singapore, Russia, Indonesia and the UAE. Commenting on the issue, the chief economist at WorldFirst, said: “These SMEs will be our global exporting pioneers post-Brexit and it is vital that the government and wider industry does all they can to support them. This could mean anything from facilitating connections between UK small businesses and foreign counterparts, to offering advice and training on how to do business and communicate with international trading partners.” Despite the more confident outlook, 46% of those surveyed said that some form of external support would encourage them to export more. Digging deeper, 18% want help to discover international partners, while 17% want to see government to play a more active role. At times like these, government departments such as UK Export Finance (UKEF) is useful as it offers insurance and capital to viable UK companies. Elsewhere, the China-Britain Business Council is on hand to support and advise UK businesses who are considering entering the Chinese market. The UK government has been trying to aid businesses by equipping them with tools such as the legal proceedings and laws they need to know so as to reach its goal of £1tn worth of exports by 2020. Leaving the EU might pose a challenge but with the Far East as well as other international markets proving to be the silver lining, it seems like company heads would do well to look beyond EU borders.

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The export rumour mill You’ll see and hear a lot when it comes to shipping your business out across international borders but how much of it is accurate?

eople will always have a difference of opinion when it comes to certain business situations. For example, is it better to bootstrap or seek funding early on? What works for one company will not necessarily work for another – although that doesn’t mean anyone is necessarily right or wrong. However, there’s a difference between opinions and what is fact or fiction. Some business myths come from assumptions and others from word of mouth but, regardless of its origin, a myth is still false. And when it comes to exporting, one such belief is that small companies can’t thrive overseas – which was denied by Dominic Jermey, the former UK Trade & Investment chief executive back in 2014. Supporting that further, the June 2018-released UK Export Finance report revealed smaller businesses accounted for 77% of the UK exporters that the government funding arm helped sell in 75 countries over the past year.

So to prevent any other UK leaders falling for international information they believe to be accurate, we’ve spoken with a handful of entrepreneurs that have expanded globally to find out what fables they were fed during their expansion.

Beware the costs According to Omar Rahim, CEO of Energi Mine, which now operates in South Korea, there were a couple of standout myths he heard when looking at taking his company overseas and cost was chief among the factors. “Probably the first myth we encountered was that moving into new territories is phenomenally expensive,” Rahim says. “Really, it doesn’t need to be if you manage it properly. If you try and do everything yourself, from a distance then the costs can soon rack up.” The second thing he was led to believe is that

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you need to become a font of knowledge before daring to embark on an export expedition, which also proved to be inaccurate. Referring to cost and expertise, he advises: “In both cases, the key is to make use of local support specialists that know the ground you want to cover and can to get you up and running at reasonable rates, rather than trying to hire and negotiate deals on premises and services from afar.” We know that discussion with peers can be a good thing but you hear a mixed bag of positive and negative points, the latter of which could easily act as a deterrent. Indeed, Rahim was met with a fair share of horror stories when conferring with others. “Issues of spiralling costs and expansion plans becoming time vampires that drain the rest of the business are commonplace and you can’t help yourself but accept that it’s an unavoidable part of the challenge,” he details. “However it really doesn’t have to be that way. Just plan, be smart, and don’t try to do everything yourself. Local help is essential to being successful in new territory.”

conserving a company once it’s up and running in an overseas market. Commenting on his experience, Richard Valtr, founder and CEO of Mews, the hospitality software provider, says: “Much gets made of the pains of starting up and maintaining businesses in other countries. For us, hiring our financial director and using a cloud service has really helped us streamline processes in all of these different countries. Of course, there is no startup that seems to remove the headache of transfer pricing but startups shouldn’t be afraid of the risk and must be willing to accept some costs in order to establish multi-market growth.”

Piece of cake Seemingly, myths tend to be linked to negative elements surrounding exports. However, on the other side of the coin, Tom Jeffrey, e-commerce manager at Jules B, the luxury clothing brand, revealed people think internet retail is a walk in the park. “That the online market place is ‘easy’ is a myth,” he declares. “A lot of people think it’s easy but it takes a lot of time and effort to do it right. We would always recommend putting the effort in at the start as it will make everything more stable and automated in the long term, which makes doing business online and continuing to expand much easier.”

It’s too risky For Ashleigh Hinde, founder of Waldo, she could have quite easily been put off exporting altogether had she taken the words of peers to heart. “Generally speaking, the feedback I’ve experienced around internationalising is that people are very risk averse and tend to warn against it,” Hinde reveals. The key, she believes, is to take a step back and assess the risk for yourself as it’s you who knows your business better than anyone else. “For a lot of products their points might be valid but I think it’s important to look at your business through your own lens and make decisions, particularly regarding expansions, based on your own situation. Analyse your own company’s abilities and resources and if you truly believe it will work, don’t let people scare you.”

Running wild Elsewhere, another myth that can get in the way isn’t simply costs of getting started or the risks once you’re there but

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