Aussie SMEs urged to step up their game as they look towards China

Asia, Asian markets, Asian market

Australia’s National Centre for Asia Capability is urging small and medium-sized businesses to improve on their capabilities that would help them succeed in penetrating the Asian market.

The reminder comes as many SMEs are looking towards China in their international expansion on the back of the success many Aussie big businesses are having, despite ongoing tensions between to the two countries at a political level.

Already, according to Asialink Business in its new report Risk and Reward: Opportunities for Australian SMEs in China, a growing number of Australian SMEs have already adopted innovative approaches and are achieving success in the region.

“Australian SMEs are still achieving outcomes from China, based on prevailing consumer demand. Consumers recognise quality when they see it [and] savvy Australian companies leveraging this demand have adapted their strategies and operating models to find success,” Asialink Business CEO Leigh Howard said. “While Aussie SMEs don’t have the resources of big business when operating overseas, with innovative approaches many are achieving sustained growth.”

“While it’s true big international brands are popular in China, interest in smaller overseas brands with unique offerings has taken off, with small and medium-sized producers of distinctive products leveraging the high regard international consumers have for Australia as a producer of safe, clean, and high-quality products,” Howard added.

While political tensions, rising freight costs, and travel restrictions present ongoing challenges, overcoming local market competition and playing to a clear niche are increasingly important according to the report.

“COVID has largely reset the playing field and we are seeing Australian SMEs experiencing success amid a rise in the number of affluent consumers across Asia,” Howard said. “Companies in the skin care, healthcare, food and fashion sectors are some of the best performers, despite supply-chain issues.”

In the past, many Australian consumer brands were introduced to the China market by ‘daigou’ traders, Chinese students or tourists in Australia who buy up goods at retail or factory outlets and take them back to China for resale. While COVID-19 dramatically reduced this traffic, the report noted that eCommerce channels have picked up the slack in bringing foreign goods into China.

For Howard, the growth of eCommerce has created new digital marketing opportunities that Australian businesses can take advantage of. In addition, there is growing diversification and interest in new markets such as Southeast Asia and India, though China remains Australia’s largest export destination and the biggest consumer market in the world.

“It has also become a more complex market for Australian businesses to trade, since restrictions were imposed on a range of imports, including barley, wine, seafood, beef and coal,” Howard explained. “Australian SMEs operating in China need to conduct regular risk assessments to ensure they are comfortable with their short and long-term risk exposure.

“Trade analysis and reporting frequently focus on key commodity sectors and how some of Australia’s largest companies have navigated this complex landscape,” Howard added. “But the experience of SMEs has been largely flying under the radar.”

He emphasised that in order to remain competitive in China, Australian businesses will need to keep pace with rapid changes in consumer preferences and expectations for speed, variety, and service when shopping.