SMEs should Export more to Germany

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SMEs should Export more to Germany

UK companies are neglecting backyard business opportunities says a recent Guardian article. So why should SMEs be sending more containers to our European neighbours?

Even though export is very important for businesses in the United Kingdom, a great deal of companies overlook important markets closer to home explains the article.

UK businesses that aim for the international market often focus on exotic countries that are on the other side of the world, such as the booming markets of Asia, Africa and South America. However, countries with strong markets closer to home might be very interesting for British companies as well. Take for example Germany. This EU country has the largest economy in Europe and, more importantly, the German economy is the fourth strongest in the entire world.

Stating that there are currently no substantial export links between Germany and the UK would be wrong.  Germany is the UK’s biggest export market with a whopping 39 billion Euro of goods and services being sold to the country every year. Yet, there is still more to be gained in the country that is known for its bratwurst and beer:  Germany is the perfect gateway to other European countries, both those in the west and in the east of the continent. In addition, despite the crisis in the euro zone, Germany has managed to grow more than 3 per cent since 2009. According to UK Trade and Investment (UKTI), this has resulted in a great deal of successful export in the automotive components, healthcare, ICT and creative industries.

German success stories cannot only be found in these kinds of industries; people in Germany are asking for more consumer products as well. The SME Tangle Teezer saw a window of opportunity here and tried to introduce their product on the German market. This proved quite difficult, however: even though the hair detangler proved to be very successful in countries such as Sweden and Finland, German consumers just weren’t too thrilled about the product. Gemma Clarke, managing director of global markets at Tangle Teezer: ‘We’d been very successful in the UK and in northern Europe, Norway, Denmark and Finland. We eventually understood that there are some market characteristics that are very particular to Germany.’

As the German market is a large and very stable market Tangle Teezer was determined to crack it. It took the company a year and a few risky decisions to achieve this. With help from the UKTI’s overseas market introduction service (OMIS), Tangle Teezer first explored the market they wanted to tap into. Their discovery? Many of the problems they faced had to do with the German consumers themselves. Clarke says Germans are very skeptical about new products and want independent evidence about their workings before they decide to buy: ‘What we had to do is almost build a PR campaign. If a German with real credibility stood up and said ‘this is a great product’ then that would have helped us.’

Eventually, their research and the embrace of the Tangle Teezer by a famous German hairdresser helped to provide German consumers with the much needed evidence. However, this was not the only difficulty Tangle Teezer encountered. The search for a distributor turned out to be quite the challenge as well. Each German region has its own distributor and as no distributor in any of the those regions wanted to take on the product. Tangle Teezer took a risk; the company decided to let their product be distributed by two young, freshly graduated German men. The pair successfully launched the detangler on home shopping channels and eventually got a deal with Muller and DM, two big German retailers.

British German Cultural Differences

The UKTI has stated a number of cultural differences between Germany and the UK that British companies must take into consideration when they wish to enter the German market. For example, the most senior manager available must be sent to the country to negotiate. This person must be able to speak for the entire company and must be in the position to make decisions. Moreover, although the standard of English in Germany is quite high, it might also be a good idea to have the introductory letter a company sends translated to German. The UKTI also advises to send German company brochures (or add an insert with a German translation). Having a local business partner is also very important. Clarke even claims having such a partner has boosted the company’s credibility.

Unlike the UK, Germany has a great deal of regulations. If British companies want to export to Germany, it is advisable to check if and how their sector is affected by these. Companies can get help for this by the UKTI, and the German-British Chamber of Commerce is also available to advise on issues such as tax support.

According to the UKTI, as about 99 per cent of all German companies is an SME, the German market is very supportive of this type of business. The story of tangle Teezer underlines this; now that the German consumers have embraced their product, Germany is responsible for 25 per cent of the company’s global turnover. Clarke’s final advice is, unsurprisingly, to be persistent. She says companies must treat the market ‘differently to other markets. Once you have backing though, the rewards are fantastic.’

Katia Reed
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