Rising market for quality goods in the East offers opportunity to Irish exporters

Irish companies should look east to find a rising marketplace for quality goods and services. Increased middle-class income has transformed dynamics in the Chinese market. Until recently, competing on price was a serious barrier for Irish exporters targeting China. But a shift in consumer preferences has expanded opportunities for overseas businesses. With the reviews and comments section of e-commerce websites increasingly influencing purchasing decisions, price is no longer the c onsumer’s main priority. Product quality has become almost as important. This shift in consumer behaviour has created opportunities for Irish exporters to invest in e-commerce and serve a growing taste for quality goods. Irish companies and brands already have the advantage of being perceived by Chinese consumers as supplying premium products and services, associated with a high level of quality.

One such exporter, Felim Meade, MD of Emerald Green Baby, describes the commercial landscape that attracted his company to the region,

“Everyone knows the Chinese market has huge potential. With the government’s five-year plan for 6.5% annual growth and its ‘Belt and Road’ initiative driving connectivity between Eurasian countries, the opportunities for growth are endless.”

“The challenge lies in accessing China’s potential in a cost-effective way. Emerald Green Baby has been selling in China for three years but spent years researching how to sell there. China is a very sophisticated and dynamic market, far more advanced than what we are used to in Europe and America. The potential for e-commerce is clear when you see that 51% of goods are bought online and 80% of online sales are done on a mobile phone in China.”

China has now overtaken the US to become the world’s number one online shopping market, accounting for over 40% of global e-commerce retail sales. Two of China’s biggest e-commerce players played a major part in that growth. In 2016, Alibaba and Tencent delivered record-breaking profits, signalling how healthy China’s consumer market is. Alibaba’s profit almost doubled to $2.1 billion and Tencent’s grew 70% to $2.7 billion.

The cross-border e-commerce market is expected to reach a 7.5 trillion RMB volume (€1 trillion approx.)  in 2017 (Source: Walk the Chat), demonstrating how appealing foreign brands are for local consumers. This year, the Chinese government announced that they plan to establish more cross-border e-commerce pilot zones to support international companies gain access to the Chinese market. While China’s regulatory environment can still pose a challenge to leveraging cross-border opportunities, these pilots are an example of how the situation has relaxed in recent years.

Enterprise Ireland has increased supports to encourage more companies to capitalise on the opportunities presented by the Chinese e-commerce market in 2018. Several Enterprise Ireland client companies, including Emerald Green Baby, Ovelle, Irish Breeze and Clevamama already sell on e-commerce platforms in China. Irish companies considering China are encouraged to conduct diligent market research and visit the region to ensure they understand consumer preferences in their sector before committing to a plan. Market research will also help companies to determine which e-commerce platform best suits their offering. While some local platforms are not well known outside China, that doesn’t make them any less important within the market itself. Enterprise Ireland’s Market Research Centre is ready to assist companies considering e-commerce expansion to China.

When visiting the region, Irish companies should also aim to meet potential partners and distributors to get a practical sense of the market and explore the need for their products or services. Relationship building is essential to doing business in China and often must be done face-to-face. Many businesses credit their interpersonal relationships as key to successful business in China. In some markets, personal connections can still outweigh other commercial considerations. Contact Enterprise Ireland in China for expert help with building those connections and growing your business in the region.

This article was originally published in the Sunday Independent

Guest Blog: Ireland’s International Traders Remain Optimistic for 2016

Commenting on HSBC’s 2016 Trade Confidence Survey, CEO of HSBC Ireland, Alan Duffy, says that Irish businesses remain optimistic about trade prospects but have more confidence in the local than the global outlook.

It is a measure of how far we have come as an economy that HSBC’s 2016 Trade Confidence Survey of 24 global markets saw Ireland at the top end of the rankings for positivity around its local economic outlook.

We have all seen that the combination of wage restraint during the crisis years and the exchange rate effects of the ECB’s programme of Quantitative Easing have both provided a lift to Irish competitiveness.

Whilst the outlook was inevitably moderate as the value of the euro eventually normalised, an economic recovery in advanced economies across the world likely helped sustain a robust performance for Ireland’s export sector. In particular, Irish exporters are well positioned to benefit from solid performances by the UK and US.

Longer term, Irish exports will benefit from growing levels of disposable income in emerging markets, and China will likely become one of our top export destinations in decades to come. In the near term, the advanced economies of Western Europe and the United States continue to be our biggest sources of export demand. As such, Ireland is relatively well placed to withstand any headwinds coming from a slowdown in emerging markets.

Despite these positives, overall exporter optimism had actually eased somewhat in Ireland. This was reflective of reduced optimism in the performance of the global economy. Irish companies expected the global economy to worsen slightly during that period. This slip in confidence levels reflected the deterioration in the global trade environment. World trade growth had slowed sharply that year, with import volumes in leading emerging markets, such as China, Russia and Brazil, weakening significantly.

However, the recent downturn appeared more cyclical than structural in nature. As many of these economies benefit from strong economic fundamentals, they are likely to be an important driver of global economic growth and trade over the medium term.

Perhaps aligned to such caution over the global economy, currency and commodity price volatility had emerged as the top financial risks anticipated by Irish companies. With this in mind, many were looking at strategies to overcome these risks such as negotiating better terms with trade partners and internal cost cutting.

Across Europe, stronger competition is the single most dominant challenge for businesses trading internationally. In line with rising cost pressures and anecdotal reports that companies are reaching the limit on the amount of cost increases they are able to swallow before passing them onto consumers, the emergence of competitors who compete solely on price is outlined as the biggest challenge, with the majority of Irish firms also highlighting it as their main worry.

With such competition becoming a concern, differentiation becomes increasingly important. That is why many Irish corporates are focusing on improving customer satisfaction and employee skill sets as their main objectives for the next six months.