Why Aussie SMEs are winning in China despite tensions

Aussie SMEs Winning in China despite tensions – New Report

Australia’s National Centre for Asia Capability is cautioning small and medium-sized businesses, they need to be as Asia-capable as big business in order to thrive in the challenging Chinese economy, with SMEs accounting for 88 per cent of all Australian companies.

A new report, ’Risk and Reward: Opportunities for Australian SMEs in China, released today by Asialink Business has found Australian SMEs adopting innovative approaches are still achieving success.

“Australian SMEs are still achieving outcomes from China, based on prevailing consumer demand. Consumers recognise quality when they see it. Savvy Australian companies leveraging this demand have adapted their strategies and operating models to find success,” Asialink Business CEO Leigh Howard said.

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“While Aussie SMEs don’t have the resources of big business when operating overseas, with innovative approaches many are achieving sustained growth,” said Howard.

“While it’s true big international brands are popular in China, interest in smaller overseas brands with unique offerings has taken off, with small and medium-sized producers of distinctive products leveraging the high regard international consumers have for Australia as a producer of safe, clean, and high-quality products.”

While political tensions, rising freight costs, and travel restrictions present ongoing challenges – overcoming local market competition and playing to a clear niche are increasingly important.

The report shared the hard-won experience of 11 Australian businesses selling into China throughout the pandemic era, across food, fashion, health, and skin care sectors.

“This report shines a light on the innovative approaches these Australian businesses are using to succeed in the region.”

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“Covid has largely reset the playing field and we are seeing Australian SMEs experiencing success amid a rise in the number of affluent consumers across Asia. Companies in the skin care, healthcare, food and fashion sectors are some of the best performers, despite supply-chain issues” Howard said.

In the past, many Australian consumer brands were introduced to the China market by “daigou” traders – Chinese students or tourists in Australia who buy up goods at retail or factory outlets and take them back to China for resale.

COVID-19 dramatically reduced this traffic. But the growing use of e-commerce channels to bring foreign goods into China has picked up the slack.

“The growth of e-commerce has created new digital marketing opportunities for Australian businesses to shape their brand.”

There is growing diversification and interest in new markets such as Southeast Asia and India, however, China remains Australia’s largest export destination and the biggest consumer market in the world.

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“It has also become a more complex market for Australian businesses to trade, since restrictions were imposed on a range of imports, including barley, wine, seafood, beef and coal.”

“Australian SMEs operating in China need to conduct regular risk assessments to ensure they are comfortable with their short and long-term risk exposure.”

“Trade analysis and reporting frequently focus on key commodity sectors and how some of Australia’s largest companies have navigated this complex landscape. But the experience of SMEs has been largely flying under the radar,” Howard said.

Howard said to remain competitive in China, Australian businesses will need to keep pace with rapid changes in consumer preferences and expectations for speed, variety, and service when shopping.

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