Logistics & Fulfilment

Two in three Australian brands are looking abroad to scale up. Here’s why

For a mature market of 25 million consumers, many Australian retailers and brands are beginning to look offshore for growth – a path that offers tremendous opportunity but can come with daunting challenges. 

Global e-commerce logistics provider ShipBob recently released its Global State of Fulfillment Report, which suggests that 36 per cent of brands internationally will ship to new countries this year. 

ShipBob’s GM for Australia and New Zealand, Guillaume Deront, a 15-year e-commerce veteran, believes the proportion of Australian companies prioritising overseas access this year and beyond is close to double that rate. 

“Anecdotally, two in three conversations that we’re having with Australian brands today are about breaking into the US, the UK or mainland Europe. This is not just a small trend; a lot of the conversations right now are very much focused on global expansion.”

Exporting, he says, represents the single biggest opportunity to reach new audiences at scale, boost top-line revenue and capitalise on seasonal activities. At the same time, the maturity of the Australian market is such that not only is the growth potential limited, but the cost of customer acquisition is spiralling. 

“It is becoming a lot harder for Australian retailers to rescale domestically,” Deront told Internet Retailing.

ShipBob is a global supply chain and fulfilment technology platform designed for SMEs and mid-market e-commerce brands. The company was launched in the US 10 years ago and has nearly 60 warehouses and warehousing facilities spread across six different markets.

Data from Statista predicts the global e-commerce market will reach US$4 trillion this year, with an annual growth of 10 per cent forecast for each of the next five years. Australia represents 2 per cent of the global market, with the UK 16 times larger and the US 25 times. Deront says those figures show the enormous offshore potential for Australian brands. 

Why now is the best time to expand abroad

“The global environment suggests that it is now more important than ever for brands to get on that global expansion bandwagon quite early in their journey, just to make sure that they capitalise on the growth potential that is there,” says Deront.

And with a free trade agreement in place between the UK and Australia and the growing appeal of nearshoring in the US, reducing tax compliance barriers and costs, there has never been a better time to explore offshore markets, he says. 

Further, there are a lot more opportunities and channels to use to achieve scale. Brands can now work through Amazon and social media, including the burgeoning TikTok platform, their own direct channels, or through partner retailers. “The tools are there, the technology is there – it’s really about ensuring you have a very informed and clear strategy to expand successfully.”

He concedes it may seem intimidating to brands expanding to markets on the other side of the planet, many time zones away and a 12- to 20-hour plane flight to reach in person.

“There are a lot of areas where you don’t know what you don’t know – especially in the world of logistics, which is a very nuanced industry. It’s very important to create powerful partnerships in the market to make the whole process a lot easier.”

The most significant barriers to entry will be costs and units of economies. Shipping a parcel from Australia to the US can cost $20 to $40 – or even more, depending upon the parcel size – which might prove cost-prohibitive for many end consumers, impacting conversion rates. 

“Logistics is the second most significant cost on an e-commerce brand’s profit & loss,” says Deront. “So right now, the core focus for a number of those brands is around driving supply chain efficiencies and focusing on profitable growth levers. In this day and age, everything that does not yield the right return on investment is undoubtedly being reviewed and reconsidered.” 

One key opportunity for retailers embarking on their internationalisation journey is the growing trend of near-shoring, which allows Australian retailers who want to break into the US to reduce tax and duties on imported goods. A US tax rule allows inventories of high-value goods to be stored in locations that are close to the US – Canada or Mexico – and then shipped into the US (with daily limits per customer).

This makes it more economical to use those countries as distribution hubs for products that are expensive to import, such as apparel and footwear, he says.