Small businesses risk missing out on post-Covid growth

Banking & Finance
| The European | 6 December 2020

Businesses could be missing out on the potential of export, to support their growth and recovery through the Covid-19 pandemic, according to new research released by the Alibaba Group.  

Despite strong global demand from international markets, just one in five small businesses in the UK are planning to do business overseas in the next year.   

‘The Export Recovery’ conducted by the Alibaba Group, highlights examples of successful exporting stories from small British brands, and includes research by YouGov from a sample of 1,000 small businesses questioned between October 20 -23.  The study found that common misconceptions related to cost, complexity and cultural barriers were the preventing British businesses from branching out.  

Too small to export 

One of the most significant concerns among UK small businesses is that they are ‘too small’ to succeed beyond British borders, with more than a quarter (27%) saying their size puts them off exporting. Meanwhile, 20% fear there isn’t strong enough demand for their products overseas, while 19% 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 19% of small businesses planning to export to new markets will do so in an effort to counter the impact of Brexit, while 12% say the Covid-19 pandemic has pushed them to look for new international opportunities.  A further 19% said maximising growth in their current markets has caused them to look overseas. 

Cultural familiarity 

Europe tops the list as the most popular target market for businesses that are planning to export, with more than half (52%) 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 language primarily, with 31% saying that the ability to communicate in English is a key reason for prioritising Europe, while over a quarter (28%) put it down to cultural familiarity.  

Just 17% of small businesses with global ambitions are looking to South America, and just 7% to China.  

David Lloyd, General Manager of UK, Nordics & The Netherlands, Alibaba Group, comments: 

“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.   

Lloyd’s advice for small businesses encouraged them to “explore the role and potential of export” and to contemplate the advantages of “strong economies in less familiar markets.” He finished by stating: “the opportunity is there: it’s easier than you think and it’s too big to ignore.” 

A missed China opportunity 

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 also known as China’s Singles Day, where $494 million dollars’ worth of UK goods were sold during an 11-day period. 

China’s Singles Day generates more sales than Black Friday and Cyber Monday combined, although not an officially recognised public holiday in China, it has become the biggest online and offline shopping day in the world. In 2020 Singles Day generated over 75 billion USD, a 26 per cent increase compared to the same time frame from the previous year.  

Despite these figures, many UK 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. This perception could cost British 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. 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. 

Simon Boyd, Sales Director, SmoothSkin, added: 

“Selling our products in China has completely transformed our business. From employing fewer than 50 people back in 2017, we’ve now got more than 300 staff members and China is one of our largest markets globally. There is a huge opportunity out there for small businesses, you just need to make sure you go about it the right way. 

“My advice for any small business considering entering China, is to spend time researching the market prior to the launch, and find great partners to work with. You can then launch, test and learn quickly as you grow. China operates at a rapid pace and the quicker you can understand what the key trends are in your product category, the quicker you’ll be able to adapt and grow your business in the market.” 

Follow The European to stay up to date with the latest global Finance news. 

Check out our Banking and Finance news section for similar stories. 

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