Reaching Australian Consumers: Market Characteristics andOpportunities

Australia remains a standout among developed economies, supported by strong domesticdemand and consumption. Yet, this vast and diverse territory with strong presence ofinternational brands presents challenges for new suppliers to enter the market. Thisarticle examines the landscape and trends of the Australian consumer market andhighlights the opportunities for Hong Kong companies in better expanding andpenetrating the market.

Resilient Economy with High Spending Power

Amid the current uncertainties in the global economy, Australia, among developedeconomies, seems to provide a favourable business environment given its resilientgrowth economy.

Australia is the only country in the developed world that has experienced a long period ofrecession-free growth. In 2018, it entered its 27th year of continuous economic growth atan average annual growth rate of 3% and is expected to achieve the highest economicgrowth among major advanced economies such as the US and UK. According toAustralian Trade and Investment Commission (Austrade), Australia is forecasted to be the13th largest economy in the world and the 5th largest in the Asian region, despite thecountry is home to only 0.3% of the world’s population. Australia has demonstratedeconomic resilience, adaptability and record of steady growth which provides a low-riskbusiness environment for Hong Kong companies.

With a well-educated and affluent population of over 24 million, the country offersconsumers with high consumption habits and strong demand for high-value products.Particularly, the state of New South Wales has the highest level of consumer expenditurein the country, accounting for more than one-fourth of the country’s 2017 total. HongKong exporters looking to sell star-quality and stylish-design products may find themarket opportunity down under more attractive in Australia as consumers are less pricesensitive among other developed economies.

Market Opportunity: Optical Goods

The transformation of spectacles from a medical device to a means of self-expression haschanged the optical industry and continue to create opportunities for Hong Kong, whowas the world’s third largest exporter of spectacles and frames in 2016, after MainlandChina and Italy.

In recent years, eyewear has started to make a major comeback on the fashion sceneand this trend is posing significant influence on demand for spectacles and sunglasses inAustralia. Increasing numbers of consumers, especially among millennials, view eyewearproducts as accessories to differentiate their styles and reflect their personality.

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Consumers are now showing preferences for niche and unique designs and usually ownmultiple pairs of spectacles or sunglasses.

In terms of the competitive landscape, international brands continue to characterizeAustralia’s eyewear market in 2017, with the top three leading players being LuxotticaAustralia, Specsavers and Essilor Australia. In an effort to stay competitive, SunshadesEyewear, a Sydney-based eyewear company, expanded its brand portfolio and includedluxury fashion brands such as Gucci in their spectacles collections. Despite the dominanceof international brands in the market, Sunshades Eyewear performed strongly last year,achieving the largest increase in sales growth.

Quay Australia has built a #QUAYSQUAD thatconsists of a loyal millennial customer base.

Bricks-and-mortar eyewear stores remain as themain sales channel in Australia yet there is agrowing popularity of online retailing. Optically, originated from Sydney, mainly sources framesfrom Italy and South Asia and sells over 3,000spectacles collections online. Without having topay showroom rentals, Optically is able to offerlower prices yet similar quality compared totraditional bricks-and-mortar shops.

In order to tap into the Australian market,Hong Kong spectacles companies could optto produce under an original designmanufacturing (ODM) basis for both local andinternational eyewear brands, and moreimportantly, fashion brands. Medium and high-end spectacles and frames are preferredby the high-spending Australian customers. For companies looking to market under theirown brand names, online platform is a preferable sales channel for Australia, given thecountry’s high levels of mobile penetration and online usage. Social media marketing isseen as beneficial to build brand awareness and loyalty, exemplified by Quay Australia,which mainly sell online and has accumulated over a million followers on Facebook andInstagram.

Market Opportunity: Consumer Electronics

The need for activity tracking, connectivity and e-payment technologies continues todrive the demand for consumer electronics in Australia, presenting growing opportunitiesfor Hong Kong electronics exporters. Telecommunication equipment and parts is thedominating category of Hong Kong’s exports to Australia and it has been growing overthe past five years to reach US$1.4 billion in 2017, representing more than 30% of thetotal. Compared to 2012, its contribution to total exports has increased ten percentagepoints.

Retail sales of smart phones in Australia remained strong, registered an 8% volumegrowth in 2017. The category has been benefited from replacement sales driven byconsumer demand for phone upgrades. Yet, demand is expected to slow due to the lesssignificant innovations in new models. Looking forward, the consumer electronics sectorin Australia is likely to be driven by wearable devices such as activity watches and smartwatches.

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Nearly one in five Australians own a wearabledevice.

Australians have traditionally enjoyed areputation for fitness, with almost one-third ofthem engaged in physical activities every day.Amid rising health consciousness amongAustralian consumers, activity wearables havetherefore become an important device for fitnesstracking. Smart watches are also utilized toperform daily tasks such as checking emails andmaking payments. According to Euromonitor, retail sales of wearable electronics in Australia ispredicted to double by 2023.

The fast-changing and growing consumerelectronics market inevitably provokes an

increase in demand for telecommunication products as well as components and partswhich Hong Kong companies can ride on. Hong Kong ODM companies are known to becapable of producing on custom-made basis and it is largely welcomed by companies inAustralia given the need to release new devices and models to keep up with theconsumer demand. On the other hand, Hong Kong electronics companies looking to sellunder their own brand names should be aware of the strict standards ontelecommunication products. Products selling in Australia must comply with the applicabletechnical and labelling standards set by the Australian Communications and MediaAuthority (ACMA).

Market Access: The Perfect Test Bed

The size of Australia is large enough for a diversified economy with nuances of consumerbehaviour but small enough to allow new products going to the market without scalingthem up. Australian consumers are “early adopters” in product trends and technology.Their willingness and openness to try new experiences and products make the market anideal test bed.

Open meeting space at Haymarket HQ, Australia.

In late October last year, Sydney’s first-everlanding pad was launched to welcome Asianstart-ups and SMEs to Australia. Fully funded by City of Sydney and coordinated by HaymarketHQ, Australia’s only Asia-focused start-up hub,the 90-day Sydney Landing Pad programsupports entrepreneurs from Asia looking to useAustralia as test market or expand into Sydneyby providing co-working space, inductionworkshops and networking opportunities. HongKong technology start-ups as well asentrepreneurs in industries such as education andhealthcare may consider using this platform totap into the Australian market or test its newbusiness ideas and products. The first cohort of the program will start in April 2019 andapplications close by the end of February.

Market Access: Leveraging Participation of Local SMEs

The vast majority (over 90%) of Australian businesses are small businesses with less

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than 20 employees. Despite the small size, a lot of them offers remarkable products withinnovative technology and design. Given a sizeable domestic market to rely on, it iscommon for Australian small and medium-sized enterprises (SMEs) to just focus on thelocal market instead of looking overseas.

Despite this, a lot of them are open to work with international suppliers. In this regard,Hong Kong businesses looking to expand to Australia may consider partnering with localcompanies to lower risks, reach a broader customer base and develop connections withan already established business community. A good way to start is to connect with somelocal chambers and industry associations, such as Victorian Chamber of Commerce andIndustry, the largest business body in the state of Victoria with more than 15,000registered Australian businesses.

However, in recent years, business is booming for Australian small businesses sellingoverseas. The findings, featured in Australia Post’s Small Business Exporting insightpaper, revealed that those small businesses that export overseas reported 20% higherturnover than their domestic-only counterparts. Despite that, only a quarter of smallbusinesses in Australia are currently exporting to overseas customers, with 35% sellingto China and 11% selling to Indonesia.

Australian small businesses are increasingly keen to get a foothold in the lucrative Asianmarket, yet market expansion is not easy for them without the appropriate connectionsand market knowledge. Mainland China is the second most preferred export destinationfor Australian small businesses, only trailing behind its nearest neighbouring country,New Zealand.[1] With its long-established relationship and cultural connection with themainland, Hong Kong SMEs are well positioned with a strategic role in facilitatingAustralian small businesses in their exploration of emerging opportunities in the mainlandthrough offering custom clearance and trading services for re-export as well as providingmarket intelligence on business landscapes in Mainland China.

Chinese Community in Australia

Chinese migration to Australia dates back to the gold rushes in the 19th century, whenChinese goldminers flocked to the state of Victoria to seek fortunes for their families. Andnow, Australia is home to more than 1.2 million people of Chinese ancestry, of which twoin five were born in Mainland China and over 6% were born in Hong Kong.[2] TheChinese population is concentrated in major Australian cities namely Sydney, Melbourneand Brisbane. However, over the last decade, residential patterns of Chinese havebecome more diverse, with residential clusters appear to emerge in smaller cities such asAdelaide and Canberra.

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Chemist Warehouse, a popular pharmacy retaileramong Chinese shoppers.

The large Chinese community in Australiahas led to the emergence of unique retailtrends and business models specificallytargeting that community. Thanks to thestrong bonding between Chinese expatsand their networks in Mainland China, theconcept of “daigou” was born with expatopportunists buying Australian consumerproducts on behalf of their personal networks inMainland China and sell at a premium price backto their homeland. The daigou industry is built ontrust, with Chinese shoppers relying on theirconnections on the ground in Australia to sourceauthentic and quality products. Baby formulas,nutritionals and skin care products are the most

popular items for daigou. In 2017, it is estimated that there are more than 100,000daigou operators in Australia and the industry shows no sign of slowing down. Mostdaigou operators are believed to be small businesses yet there is a growing number ofbigger operators emerging in the market. AuMake, the first daigou-focused retailcompany listed on the Australian Stock Exchange, opened a “daigou hub” where anassortment of products can be bought and shipped out to Mainland China from the store.Australian companies such as Swisse, Blackmores and Jurlique are also increasing itsmarketing efforts directly to daigou to boost sales in Mainland China.

Another example is OpenMarkets, a Melbourne-based wealth management and stockbrokerage firm which works extensively and specifically with local and overseas Chineseclients on investments in Australian markets. In an effort to cater for its Chineseinvestors, OpenMarkets provides simplified Chinese version of trading platforms as wellas mobile app for trading on the go. Telephone customer support is also available inMandarin and Cantonese.

In this regard, Hong Kong companies looking to reach the Chinese consumers in Australiashould be mindful of the importance of localization of business strategies and marketingtactics. It is crucial to establish connection with Chinese consumers through platformsthat they are familiar with or can relate to. For example, marketing on WeChat is foundto be more beneficial than Facebook in Australia when the target group is MainlandChinese. Having a customer support team which speaks the same language could alsohelp to build trust with Chinese consumers.

[1] Taking on the world: meet the Australian small businesses selling overseas, AustraliaPost

[2] Australian Bureau of Statistics

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