Australia: A great market opportunity for UK businesses in 2022
The UK has signed a free trade agreement with Australia, which comes into effect in 2022. This is the first post-Brexit trade deal negotiated from scratch and not simply rolled over from terms that the UK enjoyed as an EU member. The deal aims to increase trade between the UK and Australia and the Asia Pacific region more generally. So what’s the opportunity for UK businesses and how can you take advantage of it?
Australia at a glance
- 12th largest economy in the world and 5th largest in the Asia-Pacific region.
- Affluent, tech-savvy population of 26 million people including 1 million British expats.
- Over 60% of the population live in Australia’s five largest cities (Melbourne, Sydney, Brisbane, Perth and Adelaide), making it easy to prioritise where to launch your product or service.
- As well as sharing the same language, Australia has broadly similar business and legal practices to the UK – such as intellectual property (IP) protection and the rule of the law.
- Ranked by the World Bank as the 13th easiest country in which to do business, with stable institutions, sophisticated financial systems and good governance.
- Currently, the UK’s 14th largest export market – trade between the UK and Australia totalled £14.5 billion in the four quarters to the end of Q3 2020 (ONS, 2020) – which means the UK sells more to Australia than to India or China.
- Australia has strong trade links with affluent markets in Asia and is considered a gateway to the Asia-Pacific region. The country’s biggest two-way trading partner is China, followed by Japan and the US.
- Materials and communications require little adjustment as technical standards are often similar – particularly important for engineering and industry.
What does the UK-Australia trade deal aim to do?
The UK government lists the benefits for UK businesses here. In essence, the key points are:
- Tariff-free exports of goods
- Greater access for service providers
- More opportunities to trade digitally
- British citizens under 35 will be able to work more easily in Australia, allowing for cross-market B2B/B2C expansion
- Potential to deepen investment relationships for financial services
Overall, the deal means that British products will be cheaper to sell into Australia and British consumers can enjoy popular Australian exports at a cheaper price.
Once Australia eliminates tariffs on all UK goods, with the new deal in place, the hope is that Australia will become a larger export market for the UK. The UK government estimates that the deal could eventually increase British exports to Australia by almost £1 billion. They also estimate it could increase overall UK GDP by £500 million while increasing workers’ wages by £400 million.
The EU does not currently have a free trade agreement (FTA) with Australia, although negotiations between the two entities have been ongoing since June 2018. Trade is currently conducted under the 2008 EU-Australian Partnership Framework, which aims to reduce technical barriers and improve trade but is not a formal FTA. This means there is clear opportunity for the UK to deepen its trading relationship with Australia beyond the status quo under the new deal.
The UK Government also hopes that the deal will help the UK to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), which would improve access for UK businesses to markets in the Asia-Pacific region. The support of an influential signatory such as Australia could assist the UK’s accession bid.
Which sectors can benefit?
Generally, British products and services tend to be well regarded in Australia. Services exports account for more than half of total exports to Australia and are led by travel and transportation, financial and professional/other business services. Technology is a lucrative sector because of the high demand for digital products and services to transform business and government. At present, the leading UK goods exports to Australia are cars, pharmaceuticals, machinery and equipment, scientific instruments, clothing, and beverages.
What’s the e-commerce opportunity?
E-commerce sales in Australia are expected to continue to grow considerably in the years ahead:
- The impact of the pandemic on Australian e-commerce was huge. According to Salesforce in Q3 and Q2 of 2020, e-commerce growth in Australia was the highest across the globe. Australia Post, in its 2021 E-commerce Industry Report, suggests that four out of five Australian households (9 million) made online purchases during 2020.
- According to Australia Post, the fastest growing categories for online commerce are:
- Variety stores – e.g. large retailers and online marketplaces
- Health and beauty
- Home and garden
- Hobbies and recreational goods
- Food and drink
- Australian consumers have a strong recognition of and appetite for UK brands that are of high quality, unique and exclusive to the UK.
- New e-marketplaces have unlocked more opportunities for UK retailers to sell online in Australia, including Amazon Australia and Catch.com.au.
Fashion e-commerce is a particular opportunity:
- The fashion industry in the UK has been growing steadily over the last seven years domestically and internationally and ended 2021 with revenues of over £62 billion.
- There is demand specifically for products from UK-based retailers and brands for non-UK customers. The number of searches on Google for UK-based fashion brands from global markets has grown by an average rate of 46% each year since 2010.
- Currently, two of the largest retailers to reach international audiences are the UK fashion houses ASOS and Net-A-Porter. With a tariff-free agreement, smaller fashion labels and retailers can take advantage of Australian opportunities.
Financial services also have growth potential
- The UK and Australia signed a Fintech Bridge agreement in 2018, which simplifies access for UK companies and provides a framework to harmonise fintech policies. Both governments have committed to providing support for UK fintech firms selling products and services in Australia.
- The UK is recognised as a fintech hub and source of expertise in Australia. Various UK fintechs have already achieved success in Australia, including Revolut, Transferwise, TrueLayer and Recordsure.
- The UK and Australia have also agreed to co-operate on developing their respective open banking regimes – an important step towards improving market access for new third-party providers of financial services.
Tips for expanding your business into Australia
Carry out local keyword research:
- Whilst the UK and Australia share a language, there are differences which could affect how your product or category is understood and searched for.
- Don’t simply take your UK English keyword list and use it for the Australian market. Instead, carry out local keyword research from scratch, and use a Local In-Market Expert to guide you.
Consider logistical challenges:
Australia’s sheer size and distance from the UK means you may face challenges including:
- Travelling (24 hours from the UK by plane)
- The time and money needed to ship or send goods
- The time difference (7 to 11 hours ahead of the UK)
- Vast distances between states and cities within the country
- Counter-seasons creating complications for some fashion retailers
Consider using a marketplace:
- eBay Australia is the most popular Australian marketplace, receiving approximately 75 million monthly website visits. Of these shoppers, 14 million are unique visitors. This means that over half the population of Australia visits eBay.com.au every month.
- eBay has evolved into Australia’s ‘brand marketplace’ and has a large number of globally recognised brands with direct representation. This includes Crocs, Harley-Davidson, Dyson, Apple, Microsoft and many others.
- Amazon Marketplace entered the Australian market in 2017, later than eBay. However, unlike eBay, Amazon in Australia did not need to grow and evolve with the market and technology – instead, they were able to launch with a significant marketing budget, ready-to-go online platform and shoppers who were already using the platform globally.
- MyDeal is also popular in Australia. MyDeal is focused on brands which sell bulkier items such as tables, sofas and mattresses, but it also features items such as fitness equipment and pet products. It’s a good option for many e-commerce businesses because it handles much of the logistics involved in listing.
Ensure you offer the right online payment methods:
- According to Australia Post research, 48.8% of all online payments are made via PayPal. Credit and debit cards account for 39.9% of online payments.
- The fastest growing segment within payments is the Buy Now, Pay Later market. Worldpay’s Global Payments Report 2020 stated that nearly two million Australians, or 10%, used a Buy Now, Pay Later product in 2019, representing 8% of local e-commerce payments, up from 3% in 2018.
- BNPL market leader AfterPay recorded a 15% increase in customers over 2020.
- Other BNPL players in Australia include ZipPay, Klarna, Sezzle, Openpay, Brighte, Humm, Splitit, and Laybuy.
- Read Oban’s explainer on Buy Now, Pay Later around the world here.
Ensure mobile is at the heart of your e-commerce strategy:
- With mobile penetration at close to 100%, mobile payments and purchasing needs to be central to your retail strategy.
- More than 90% of Aussies used their mobile phone to make a purchase in 2020. As in other markets, mobile e-commerce traffic continues to grow at the expense of desktop.
- Mobile site speed and the entire user journey on a mobile must be seamless to avoid customers abandoning their intended purchases.
Take account of shipping costs:
- Like many people, Australians dislike paying for shipping with 60% of Australian’s consumersabandoning their shopping basket due to high delivery rates.
- Displaying all costs at the checkout in the form of taxes, duties, and additional handling fees upfront can help consumers understand why prices are so high. Alternatively, marking up your product’s sale price to cover shipping costs can be an effective method to engage consumers.
- Offering a cheaper standard shipping option at the checkout can encourage more customers to buy. In Australia, waiting 5-7 days for delivery is not uncommon, so offering a standard delivery option alongside an express option could ensure more consumer’s checkout successfully.
Make returns simple:
- An Australia Post survey showed that 22% of Australian shoppers felt returns were too expensive. For clothing brands especially, providing the most painless and affordable returns policy is important.
Take account of key dates for your campaigns:
- Black Friday and Cyber Monday are well-established in Australia and are the busiest e-commerce period of the year.
- Depending on your sector, other dates will be relevant. For example, the Melbourne Cup (1st November in 2022) is a key date for fashion – as people dress up for Melbourne Cup parties.
- Australian national public holidays include New Year’s Day, Australia Day, Good Friday, Easter Monday, Anzac Day, Christmas Day, and Boxing Day.
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If you are planning to expand your business internationally in 2022, Oban can help. To find out how, please get in touch.
Oban International is the digital marketing agency specialising in international expansion. Our LIME (Local In-Market Expert) Network provides up to date cultural input and insights from over 80 markets around the world, helping clients realise the best marketing opportunities and avoid the costliest mistakes.