Seven in ten European businesses expect their exports to grow next year, a welcome boost to revenues at a time of rising costs, according to a new survey.
At a time of economic uncertainty and rampant inflation, just under four in five survey respondents said exports have relieved pressure on their businesses by diversifying revenues.
Four in five European businesses are already exporting and 70% expect their exports to increase next year, e-commerce giant Alibaba Group’s latest research revealed. The report was based on a survey of over 9,000 European businesses across nine markets between Feb. 21 and March 2.
Over a quarter of respondents export to other countries in the European Union, 21% to North America and 19% to China, the survey showed. Italy has the highest proportion of businesses that export at a whopping 91%. Belgium and Denmark follow closely behind both at 90%.
On average, business owners surveyed said they had derived just over half of their annual revenue from exports during the past 12 months, highlighting the importance of open trade. Business owners also reported exporting had fueled innovation across their operations, increased headcount and encouraged broader product ranges.
The briefing, called the Export Opportunity Report [see below], showed 79% of companies found that exporting had strengthened businesses in several meaningful ways.
“These findings reveal that businesses that export are more resilient, innovative, can attract and retain top talent and, critically, they are achieving growth in the currently challenging business climate,” said Michael Evans, Director and President of Alibaba Group, which supports thousands of European businesses to export globally with technology, expertise and logistics infrastructure.
Exporters Face Challenges
While larger businesses are forging ahead with exports, small and medium-sized enterprises (SMEs) are lagging behind. Currently, 23% of SMEs do not export at all. For policymakers, this is both a challenge and an opportunity, as SMEs are the backbone of economies globally.
World Bank data shows SMEs represent about 90% of businesses and more than half of employment worldwide. Formal SMEs contribute up to 40% of national income in emerging economies. These numbers are significantly higher when informal SMEs are included.
Alibaba’s commissioned Censuswide to poll businesses with two or more employees and a revenue of over £1 million ($1.24 million) or over €1 million ($1.1 million) based in the UK, Germany, Italy, Netherlands, Spain, Denmark, Sweden, Belgium and France.
Businesses that export are more resilient, innovative, can attract and retain top talent and, critically, they are achieving growth in the currently challenging business climate
Despite the clear benefits of exporting, there remain hurdles, particularly for SMEs trading internationally.
Supply chain and logistics challenges are cited as the biggest barriers to export (20%), followed by a lack of cultural awareness/familiarity with overseas markets (19%), increased paperwork and red tape (18%), price competition (18%) and inadequacies in production capacity (18%).
Businesses in the UK and France list supply chain and logistics challenges as their biggest barriers to export (22%). In comparison, German companies ranked a lack of cultural awareness/familiarity with the overseas market as their greatest challenge (22%). For businesses in Sweden, increased paperwork and red tape were one of the main hurdles to exporting (22%).
Alibaba said it sees a business opportunity in helping more SMEs export. A small Spanish jewelry brand called PDPAOLA launched on Tmall Global, China’s largest cross-border online marketplace, in August last year. Today, it has about 130,000 customers in China.
Globally, commerce, marketing and trade shows are migrating online, increasing efficiencies but also potentially involving a hefty investment in time and resources. Finding a trusted export partner also ranked high on the list of barriers to international trade.
Enter online marketplaces.
Digitalization and online marketplaces are seen by businesses as a key way to expand into new markets. Overall, 61% of companies work with online marketplaces to boost exports and minimize the upfront investment of building out a footprint overseas.
“This report underscores the vital importance for small businesses of having an export strategy and a digital strategy. Both are essential for businesses to support long-term, sustainable growth,” said Alibaba’s Evans.
Around a quarter of the businesses surveyed had started working with online marketplaces during the coronavirus pandemic, with the highest proportion in Belgium (38%) and the UK (30%).
When French ballet shoe brand Repetto opened an online flagship store on Tmall in February last year, the platform provided them with immediate access to a billion consumers, many of whom weren’t covered by its physical stores in China’s Tier One and Tier Two cities. Repetto also leveraged Tmall’s customer engagement tools to boost consumer interaction and build their brand.
Overall, 80% of businesses agree that exporting has driven their digital transformation, and 76% agree that digital transformation has accelerated their business since the pandemic.
Nearly a third of businesses working with online marketplaces say they supported expansion into new markets worldwide with improved inventory planning, had better access to technology and communication tools, and enhanced competitor and market insights.
Cosnova, a German cosmetics company, launched on Tmall Global in April 2019 and reached a wider audience in China by leveraging Alibaba’s engagement tools.
Of the companies that have digitalized, 76% said it has helped make their business more efficient and reduced costs. Companies also said investments in digital processes have yielded insights that have increased the quality of products and/or customer service (77%).
Digital tools that businesses are most aware of are social media (25%), smart marketing (24%), digital advertising (23%), data analytics (23%) and digital custom clearance (22%).
Check out the story of one British exporter here