Libya, Jordan, Senegal and the Philippines – all unusual export countries British SMEs are doing business with. Be the Business looked at how each of these companies selected the right trading nations and what was crucial in de-risking the process.
“Export or die” – it’s a warning UK companies have been told for over 60 years. But now, with Brexit, the imperative to find new markets overseas has become greater.
While a globalised economy has made exporting easier in many ways, selling into unusual export countries – and those with little history of trading with the UK – can be risky.
For CBNL, which produces wireless networking equipment for mobile network operators, African countries such as Mali, Guinea and Senegal have offered great potential in terms of demand for products.
“By the time our products were ready, most Europe countries had already deployed 3G networks – or made their technology choices at least,” said John Naylon, co-founder and CTO of the Cambridge-based company, which was founded in 2000 and now has just over 100 employees. “However, in Africa the market was still in play, and the particular characteristics of the products chimed well with the ground conditions of the market. Once some references are established in a region, it’s relatively easy to exploit those references and increase sales locally.”
The challenges weren’t necessarily technical, according to Naylon. “Often things like customs and paperwork bring the greatest delays to individual transactions,” he revealed. “Having a good logistics partner is absolutely vital when working in some of the less well-known countries around the world. They’ll have seen it all before as far as the customs, shipping and paperwork side of things are concerned.”
Devil in the detail
A careful check of the export control rules is important for technical products – just in case they qualify as “dual use” goods or technologies. In other words, although normally used for civilian purposes they have military applications as well.
CBNL now sells to 17 countries across Africa. “When you start to identify hot spots where uptake of your product is strongest, it makes sense to invest specifically in those areas,” explained Naylon. “One way we’ve done this is to open local offices in Nairobi, Johannesburg and Lagos.”
Indigo, a software provider for warehouse management based in Durham with a turnover of £5m and 50 employees, identified the Philippines as an exciting export market because of its demographic and as a gateway to other Asian markets – including some other unusual export countries. “My big tip for anyone interested in doing business in the Philippines is to make sure you really understand how things work from a legal point of view and to engage a local company to assist you with the set up and registration,” advised Mike Hill, CEO of Indigo Software Asia Pacific.
“As an example,” he explained, “when you register a company in the Philippines, you have to show you have secured a lease agreement on the office space. But to get a lease you have to be a registered company – so it’s a catch 22 situation and you end up going around in circles. In our case this didn’t apply as we made an agreement with a local partner to allow us to use some of their vacant office space.”
Julianne Ponan, CEO of super food brand Creative Nature superfoods, which is based in Surrey and manufactures in Wales, was approached at a trade show about the possibility of exporting to Jordan. The company, which has a turnover of £1.6m and was founded in 2008, supplies raw super foods, snacks and food mixes.
“It started with a small consignment – just one pallet – and the client paid up front, so our export advisor at the Department for Business, Energy and Industrial Strategy (BEIS) suggested that we go ahead,” said Ponan. “Our local chamber of commerce was also very useful as it has experience and contacts with overseas markets. The chamber wes particularly good when some vital paperwork was lost.”
Her advise is to find the right distributor and work closely with them. It’s also important to guard intellectual property by ensuring logos aren’t altered and that all marketing literature is consistent with brand values.
Leveraging “Made in Britain”
Think of Chinese interior design and the traditional British Chesterfield sofa might not come to mind – and yet a long-established furniture company is starting to export this style to a market that is fast growing – but often difficult to negotiate with.
Founded in 2001, Newcastle-based Robinson of England, whose clients include Harvard University and Google, ships Chesterfield sofas to unusual export countries around the world – including China. Affluent Chinese visitors to London had seen Chesterfields and wanted them for their own homes.
“It’s vitally important to know with certainty who you’re dealing with. China can be something of a minefield and things may not always be as they seem,” said founder David Robinson. Arranging the export and ensuring that the clients received the products was relatively easy. The biggest challenge, he has discovered, is the ability of Chinese clients to pay for goods, because of restrictions on external banking transfers.
“When exporting to China, a common error is the incorrect classification of goods. International exports are classified using commodity codes, which determine how your goods are treated. Incorrect classification can result in higher duty rates and taxes,” said Robinson. “Being familiar with export regulations and classification terms is important, but it also helps to have an experienced shipping company that has existing relationships with brokers on the other side.”
Libya might have suffered ground-shaking political upheaval over the last few years, but it has much to go on when it comes to being an export market, according to Yamin Ibgui, finance director of baby and childrenswear supplier Minoti.
“We were initially approached at a trade show by a businessman who runs ten shops in Libya,” said Ibgui. “It’s a lovely business and we wanted to work with him. Normally we’d want to see where our products are going to be sold but we’re a Jewish company and so we couldn’t go to Libya. Instead, he came to us and brought videos and photos of his shops.”
To ensure that payments are made, finance goes through a London-based bank. However, to help with cash flow between product being dispatched and payment received, Minoti has also used the government’s UK Export Finance, a section of the Department for International Trade (DTI), that aims to ensure that no viable UK export fails for lack of finance or insurance.
Tariffs have presented another challenge, but Minoti works closely with the Libyan Embassy. “We prepare all the documentation and then, once the contents have been verified and the commodity code checks made, the boxes are stamped by the embassy and they’re ready for export.”
Minoti has been working with its Libyan client for four years. This and deals with other companies in Libya, as well as those in other unusual export countries such as Venezuela and Ukraine, mean that turnover at the Manchester-based company, which was founded in 2002, is set to rise from £13m last year to £20m in 2018.
“There are good businesses in these countries so don’t ignore them,” advised Ibgui. “Work closely with the authorities, do your research and make sure that you’re not exposed in financially or in any other way. There are real opportunities out there.”
If you’ve found this article insightful then read about Brompton Bicycle – an inspiring export strategy built on trial and error.
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