Less than one in five Scottish small businesses plan to export in next twelve months
Despite strong demand from international markets, less than one in five (15%) small businesses in Scotland are planning to do business overseas in the next year, according to new research released today by Alibaba Group.
The research highlights that businesses risk missing out on the potential of export to support their growth and recovery through the COVID-19 pandemic, due to common misconceptions related to cost, complexity, and even cultural barriers.
One of the most significant concerns among Scottish small businesses is that they are ‘too small’ to succeed beyond British borders, with over a quarter (28%) saying their size puts them off exporting. Meanwhile, 16% fear there isn’t strong enough demand for their products overseas, while 23% say it’s simply too confusing, and they wouldn’t know where to begin exploring international market opportunities.
For those who are planning to sell their products outside of the UK in the next 12 months, the decision has often been reactive, rather than part of a strategic growth plan. The research reveals 21% of small businesses planning to export to new markets will do so in an effort to counter the impact of Brexit, while 30% say the Covid-19 pandemic has pushed them to look for new international opportunities. A further 20% said maximising growth in their current markets has caused them to look overseas.
Europe tops the list as the most popular target market for Scottish businesses that are planning to export, with more than half (60%) saying that is where they’ll be looking to sell their product next. This is underpinned by a strong feeling among UK small businesses that it is easier to export within Europe than to markets further afield. This is attributed to cultural familiarity primarily, with 37% saying respondents believing it to make exporting easier.
Just 10% of small businesses with global ambitions are looking to North America, with no respondents saying they are looking to China.
According to the IMF, China’s retail market had already rebounded to pre-pandemic levels in August, and accelerated in September, demonstrating the resilient spending power of Chinese consumers. This was evidenced by Alibaba’s recent record-breaking 11.11 Global Shopping Festival, where $494 million dollars’ worth of UK goods were sold during an 11-day period.
Despite these figures, many Scottish small businesses are overlooking the opportunity due to a perceived lack of demand. Over a quarter (26%) give this as the reason for not considering China as part of their growth strategy, while 26% believe they ae too small to sell to China. This perception could cost businesses dearly, given the strong and growing demand among Chinese consumers for international goods.
From luxury goods to health and beauty and nutrition, Chinese consumers hold ‘Brand Britain’ in extremely high regard for its quality and heritage. This demand has remained resilient over the course of this year, and through the pandemic. Alibaba’s annual 11.11 Global Shopping Festival this year shows this in action. The UK was once more among the top ten markets for brands selling into China, selling around half a billion dollars’ worth of goods to Chinese consumers though Alibaba’s platforms. In fact, growing Welsh beauty tech company SmoothSkin featured alongside British tech giant Dyson in the top ten list of brands globally selling into China on Alibaba’s cross border platforms during this period.
David Lloyd, general manager of UK, Nordics & The Netherlands, Alibaba Group, said: “Large companies have always been good at exporting their products around the world. Now, technology is making it just as easy for small businesses – who may not be recognised brand names in their home market – to tap into demand for British products from overseas and to shine on a global stage.
“We helped British brands sell an incredible $494 million dollars’ worth of products in just eleven days during our 11.11 Global Shopping Festival this year.
“As consumption increasingly shifts online, businesses of all sizes need a digital strategy, to allow them to tap into and maximise growth potential in new markets. As small businesses build their growth plans for 2021 and beyond, I would strongly encourage them to explore the role and potential of export within this and consider how they can take advantage of strong economies in less familiar markets. The opportunity is there: it’s easier than you think and it’s too big to ignore.”
Scottish Development International said: “It has been an extremely tough year for so many businesses across the country, but as thoughts turn to 2021 and beyond, there’s a real opportunity for small businesses to look beyond any preconceptions related to export, to consider what role it might play in their business growth. The UK has a fantastic retail and consumer market, but there’s a whole world out there waiting for small businesses to tap into.”