“What the hell is going on in Australia? Get down there and find us a decent distributor!”
And off to the airport the international sales manager heads, to somehow try and get their brand more effectively distributed and retailed in Australia. Poor buggers. They’ve often failed before they make it to check-in.
The first and obvious mistake they make is to look at the map. Australia is a big place. Really big. We have cattle stations bigger than many countries. But most of it is empty. We have a smaller population than Shanghai or Karachi; or just 50% more than Greater London to put it in to perspective. With all that space in between the major populaces, it means that logistics and freight cost can be problematic and expensive; which makes it hard to know where best to have your product distributed from. The freight and servicing costs, can often mean a brand’s success is tied to the immediate territory it is distributed from. So, location of your Australian distributor can be critical.
The next mistake is to base their enthusiasm on the fact we are one of the richest countries in the world, with one of the highest average incomes and quality of living numbers that constantly hover in the top two or three globally. All true, but the flip side is that it helps to make Australia one of the most expensive places to do business. Bike stuff is more expensive here than most places; because it needs to be. This only exacerbates the whole online price competitiveness issue for Australian distributors and retailers (another blog post or twenty in itself) and maybe makes your product untenable here.
And then there’s the overblown sales expectations. Australia imports about 1.3 million bikes a year (a third of which are kids’ bikes) and bicycles have outsold vehicles every year for more than a decade. Recent data suggests the Australian bike industry is worth about $AUD850 million a year. Sounds promising doesn’t it? But to put that into perspective, the UK market generates more than 6 times that annually. I’m not saying we haven’t got an industry worth being a part of; just that they need to come to Australia with more realistic sales targets.
Another banana skin is to assume that their product will find shelf or floor space the moment they sign an Australia distributor. Given the actual market size, the simple fact is that a category in the Australian market can effectively be locked away by just three or four brands. And that’s not just because there are only a handful of dominant, genuinely national parts and accessories (P&A) suppliers; it’s also because of the success that the major bike companies have had with their controlled distribution retail models. The likes of Giant, Trek, Specialized and to a smaller extent, Avanti/Scott, have carved up 70%+ of the IBD network between them. All of these bike brands are now very much P&A solutions as well; or trying to be. And they leverage that like a raging bull with a crow bar, more successfully than any other market in the world.
My other favourite clanger by international brands is the old, “but we’re number one in our market” assertion. Nobody here knows or cares quite frankly. Remember that a brand’s success and foothold in a market is typically more about the quality and reliability of the local distribution, the footprint of the distributor or simply the long standing trust in that product by the consumer and retail base; and rarely the simple fact that one brand or product is ‘better’ than another. Don’t discount the strength that some brands and distributors have here, even if it’s a product you consider inferior.
So few global brands think to ask honest questions of their potential Australian partners and their realistic likelihood to gain footprint in the local retailers. What sort of account base do they have in the first place? And what sort of strength of relationship or leverage do they actually hold and why? And are they actually suitably skilled, resourced or staffed to sell your category of product(s)? They might be awesome at selling foot pumps, tyres or nutrition; but what do they know about selling clothing or e-bikes?
And finally; we’re not the UK and we’re certainly not the USA. Stop thinking that the Australian market is the same because we all speak English. Start asking specific questions about it, our reverse seasonal timeframes (another huge issue in itself), how your brand might best work here and who is best suited and resourced to make that happen.
Maybe we need to talk?
Better Bike Business