In partnership with BIOS - Import Export
A young digital businessman is urging Scotland’s SMEs – especially those in the food and drink sector – to embrace exports. Emil Stickland has organised a conference to help businesses on their export journey.
Why does Scotland need an import-export conference?
I came up with the idea of BIOS (Business In and Out of Scotland) because I thought there was a thirst for information. There are a lot of programmes out there to help SMEs, from Scottish Enterprise and so on, and they are having a very positive impact on the number of businesses starting up – but this is not transferring across into exports.
The Scottish Government’s Wilson Review highlighted the need to increase Scottish exports and identified two areas causing barriers to export for Scottish SMEs – access to finance and the difficulties identifying precisely where to get the help and advice they need.
When I came back to work in Scotland for Thrive Digital, it became apparent that there were not a lot of SMEs exporting proactively – and at the same time, they are worrying about Brexit and what that might mean for exports, especially because 80 per cent of Scotland’s food and drink exports excluding whisky go to Europe.
What do you hope the event will achieve?
It’s about knowledge sharing and engaging with the market, primarily the export market. It’s important to have imports in there too, because there are a lot of crossover skills, especially when you are talking about things like logistics and distribution. But when we are talking about Scottish brands, especially in the food and drink sector, it is predominantly about driving up exports.
Which sectors are you targeting?
We are looking mainly at the food and drink sector but also professional service providers because they are the ones with the knowledge. We have speakers like Paul Grant of Mackays [who makes marmalades, preserves, curds and chutneys] who has been in export markets a long time, and others like Fiona Houston of Mara Seaweed who is relatively new to exporting. About 70 per cent of Mara’s revenues come from exports, as other large UK retailers come on board this is set to change.
What can Scotland learn from looking to Ireland?
Ireland has the EXIM Summit specifically to drive up exports, but Scotland has nothing comparable, which is really quite surprising. Ireland is a good benchmark, with a similar GDP and population and the same language.
Scotland has almost twice as many SMEs as Ireland, but SME exports are far lower. The last available figures, for 2014, show Ireland had exports valued e89 billion and Scotland had just £27bn. That’s quite stark.
Why do you think Scotland is so far behind?
Some of it has to be down to reticence. Traditionally, there has been a kind of mental barrier in the Scottish market. However, there is definitely a new breed of Scottish business coming through, especially in technology and food and drink. They are much more confident and not just thinking “We do business in Scotland”, but they are looking at their business on a global scale.
So what are the main barriers?
In a practical sense, exporting is a difficult thing to do – especially establishing a geographically distant distribution network.
Tech companies like Skyscanner and FanDuel are selling virtual products, and professional services companies are selling their expertise – they don’t have to get a physical product on to the shelves.
That’s a very tough challenge for businesses in the food and drink sector. But in many ways, they have a good start because of Scotland’s reputation for high-quality products and the export success of the whisky industry; we need to remember that in the United States, Scotch is synonymous with whisky.
We also have high-quality products like smoked salmon, seafood and beef, and we are growing in other areas like craft breweries, cheese and jams.
But the challenges of language, culture and legalities remain. However, I believe these can be overcome with the right mindset and contacts.
Are there any digital barriers?
It is a complex area. The first step is to establish whether it is possible to benefit from engaging with new markets online.
Even with a successful UK e-commerce business or a thriving export business, don’t automatically assume you can transfer competitive advantage to an exporting business online.
Consider what a specific market is like. What are their attitudes to online buying? Different markets have different delivery systems and attitudes to online retailing and payment methods, as well as currency and language differences, and therefore those markets can very greatly.
Remember there are fewer barriers to online trade, and it is more likely that another company will be able to provide the same product or service as you. To successfully benefit from online export-led growth, differentiation is key.
There are also major issues around branding. Will your brand work in your planned country? It needs to fit your market, while staying true to the core brand.
And your website needs detailed work too. Is it set up in the right way, taking all the issues about that specific market into account.
Can you ensure delivery of a product ordered online? Is the delivery system trustworthy? Working with a good agency with strong market knowledge can go a long way.
There is a lot more to consider and some detailed thoughts can be found here: scotlandimportexport.com/2016/07/19/ecommerce/
Is it more helpful to have a local distributor providing “boots on the ground” to establish yourself in an export market?
In my experience, definitely. I would always work with an in-country partner to distribute your product; that’s what we did when I was at Rubik’s [the Rubik’s Cube is the world’s biggest-selling toy, with 450 million now sold]; there’s no way a small team based in London could have distributed volumes like that.
We worked with both large and small distributors, always picking partners very carefully on the basis of their market knowledge. It’s about the ability of a partner to get you into major retailers across the world.
Getting the right partner can allow you to punch above your weight and better navigate the various legal, financial and logistical issues.
There are some real variations in different markets – in India, for example, most online sales are cash on delivery, which is totally different to elsewhere.
And some European markets still require the physical witnessing of a contract by a lawyer.
A trusted partner can help you through because they know the market, and that’s invaluable. Yes, they take a cut but it can be much more difficult doing it yourself.
How might Brexit impact on exports?
There is a lot of confusion and uncertainty. Lots of companies exporting to Europe from Scotland are quite pleased with the fall in the value of the pound because that’s made it a lot easier to export as their products are cheaper and more attractive. But in the long term, there are a lot of unanswered questions.
If you are a company thinking of making a big push on exporting into Europe, then you are going to hold off on that – but day-to-day operations are continuing pretty much as normal.
The problematic issue is that we are still stuck in a limbo and don’t know what will happen.
What about brand? How important is it to make sure your brand transfers to other markets?
You have to consider if your brand is right, as it is, to take abroad – especially if you are looking to export to China where branding is thought of very differently. A lot of businesses change their brand slightly to go into China.
It’s also important to consider if your company values are right for a particular market.
Businesses like Jaguar and Diageo did really well in China, but Mattel struggled with Barbie because it was not what the market wanted at that time.
You need to think about how you treat your brand in a new market.
Are you looking at it in a legal way and through patents and trademarks? Or do you focus on being the highest-quality product in the market, like Dyson, or do you spend heavily on marketing to dominate the market, like Coca-Cola or McDonalds?
What’s the most important lesson to exporters?
I’d say it’s about doing your homework. Do a feasibility study and preliminary internet research to get a feel for whether the market is right for your business. Who is searching for your product online and where are they? You can do a lot of market research very cheaply. If you just rock up, it certainly won’t work.
What do you hope people will take away from the event?
I just want people to take away some knowledge, to find out something new that is useful to their business. I want them to make contacts, find out new information – just something that helps their business become profitable or more profitable. That’s my goal.
Penny Hayes of the Digital Agenda will be delivering a workshop on the Internet of Things and I will be speaking about e-commerce, using my experience at Rubik’s as a case study. Digital can be a key route into export markets.
SHARE IN THE KNOWLEDGE
BIOS 2016 takes place on 27 October at Our Dynamic Earth, Edinburgh, from 8:45am to 4pm.
Paul Mackay of Mackays and Fiona Houston of Mara Seaweed will discuss their own firms’ experience of exports, while John Brown of Clydesdale Bank will deliver a workshop on international finance, covering issues like choosing markets, how to sell, how to get paid, how to get there and knowing your customers. Penny Hayes of the Digital Agenda will lead a workshop on the Internet of Things and Emil Stickland will speak about e-commerce, using his experience at Rubik’s as a case study. Professor Graeme Roy, director designate of the Fraser of Allander Institute, will focus on trading internationally, post Brexit.