What UK SMEs need to consider before expanding into global markets.
Following UKTI’s pledge to help support SMEs to achieve international growth, B+S Card Service director of sales Andreas Stendera outlines the hurdles business may have to overcome to win success internationally.
Small-medium enterprises (SMEs) across Europe are facing some of the most difficult economic challenges in a generation, with many of the continent’s economies continuing to struggle. Increasingly SMEs are looking for new ways to become sustainable and deliver a profit, with international expansion becoming an increasingly viable option.
In an effort to stimulate growth in challenging economic times UK Trade and Investment (UKTI) recently pledged to support 600 small-to-medium sized retailers move into new markets by 2015. Nick Baird, chief executive of UKTI, said at the time: "The government is determined to ensure Britain is open for business and that innovative firms are able to take every opportunity to boost their overseas trade and attract new investment. UK Trade & Investment has teams of advisers both here and in 100 markets overseas who support UK businesses of all sizes and sectors to access export opportunities overseas. Our support for potential exporters is a key part of the government’s plan to double Britain’s exports by 2015."
THE OPPORTUNITY ABROAD
The value of international expansion has been highlighted by recent figures from the European Shopping Centre Trust (ESCT) showing that in 2012 retail turnover in the EU increased by 3.7% to €3 trillion (£2.55tn). Of this, UK retail accounted for €377.6 billion (£3.2bn) meaning retailers operating solely in the UK effectively closed the door on potentially €2.6 trillion (£2.2tn) in extra revenue available across Europe.
Despite the opportunities that expansion presents, there are a number of hurdles that SME jewellers must overcome to be successful on the international stage. Many retailers underestimate the impact of cultural and legal differences. For instance when Aurora Fashions, owner of high street stores Oasis and Warehouse, began expansion into new markets it had to invest substantial resources into translating material into native languages. But retailers must avoid getting caught in the trap of assuming that there are only these differences to tackle.
LOCATION IS KEY
Selecting the right location is a critical decision to get right as some regions present more challenges than others. For a business embarking on international expansion for the first time, the EU offers fewer challenges because the free market helps remove the trading barriers they might otherwise face.
Considering branding and product range for different markets is essential. What works in one geographical location doesn’t necessarily equate to success in another. Tesco’s withdrawal from America following the failure of its Fresh & Easy brand is a prime example. The lessons learnt by Tesco are applicable to jewellers who not only need to research new markets but also act on the findings to create viable offerings.
UK jewellers need to be aware of Europe’s many local debit schemes. Compared to the UK where Visa and Mastercard are prominent there are 24 local debit schemes in continental Europe. For instance in Germany 64% of the population exclusively uses Girocard or ELV local debit cards. Jewellers that don’t accept local payments will be automatically turning down a large portion of sales.
It is also critical for jewellers to consider which currency they will receive settlement in. To maintain clear finances the best option for many SME jewellers is to receive settlement in a standardised currency across the business – which can be costly.
To overcome these challenges jewellers should engage with the UK Card Association to understand recent developments in the industry and attend conferences relating to international payments to gain an overview of their requirements. However, staying up-to-date with the latest payment developments can be simplified for jewellers if they carefully select an experienced international partner.
SELECTING THE RIGHT PAYMENT PARTNER FOR YOUR JEWELLERY BUSINESS
There are strategic solution providers that can help a retailer unify their business across numerous geographies and take care of all the technical payment requirements associated with international expansion.
At B+S, for instance, the company is committed to a European approach to international payments and has cross-border acquiring experience for more than 40 countries worldwide with more than 20 years’ experience in the sector. By selecting a payment service provider that is both knowledgeable and experienced in cross-border payments the technical complexities can be taken care of.
REAPING THE REWARDS
The differences that exist across Europe make it difficult for jewellers to run a successful, unified international business. However, there are many success stories of retailers that have got it right and prove the opportunity is there for UK businesses, providing they capitalise on it in the correct manner. One such example is fashion brand Phase Eight that last year expanded into Switzerland and delivered a 9% growth in profits. This year Phase Eight plans to open 30 new stores across Switzerland and Germany as well as new stores in the UAE. Stories such as these prove that the opportunity is there for SMEs to take advantage of, providing they capitalise on it in the correct manner.
Andreas Stendera is director of sales at B+S Card Service. He oversees seven departments comprising 100 employees.
This Ask the Expert was taken from the July issue of Professional Jeweller. To read the magazine in full online, click here.