Austrade New Zealand

Austrade New Zealand business development manager Hansel Dunlop offers exporters the low down on the Kiwi TCF market.

What you need to know
If you are an existing label with strong sales in Australia looking for some sustainable growth in 2008 then consider New Zealand as your next export market.

Most distributors will tell you a good rule of thumb is that a properly launched Australian label can generate 20 to 30 per cent of the value of its Australian sales in New Zealand. This represents well-managed sales growth for a year and investigating the market potential is an inexpensive exercise when measured against other targets for expansion. Australian labels already selling into this market include Ksubi, Sass & Bide, Leona Edmiston, Kirrily Johnston, Kornerd and Wish.

Business opportunities
Australian fashion is well represented across all levels of New Zealand retail but the opportunities are always there for labels that present something novel to the consumer.

The fashion market in New Zealand is different from Australia. The colour palette is more Melbourne than Sydney, and we have a proper winter, so some ranges are too lightweight. In any case, it is always worth investigating the market and running your product past a few distributors or agents.

I would be the first to say that I'm constantly surprised by what actually sells and what does not. It is best to make no assumptions at all and seek the opinions of those people who are actually out on the road selling, who know the retailers, and know what works. Getting a feel for the level of interest in this way can be a quick process and most people in the industry will be very honest about your prospects.

The main barrier to entering the market is that the extra cost of freight, distribution margins, and exchange rate can cause your retail price to get too high.

Do your homework
The cost of Australian clothing sold in New Zealand typically works out at about 10 - 20 per cent more expensive than the same product in an Australian retailer.

However, the actual costs to ship the product and distribute it are much higher and it is the label that has to absorb the loss of margin. You cannot expect to make more profit per unit in New Zealand than you would in Australia. The benefits of selling additional volume however, should offset the decrease in margin. Although the prospects are good for Australian made labels, finding a suitable distributor is difficult and these labels will need to concentrate on identifying a motivated commission agent.

Dealing with trade
Personal relationships, like in Australia, are very important in New Zealand. Good distributors and agents are looking for people they can work alongside for the long term. The successful partnerships that I have helped develop usually work in a very transparent fashion with both parties being aware of the margins involved. New Zealanders are generally averse to haggling and will take a price at face value unless it is made clear that there is room for negotiation.

Conversely, nobody will question your need to make a fair margin. Whatever path to market you choose, the key is to keep your costs as low as possible. An arrangement that is becoming more common is one where the distributor purchases direct from the offshore manufacturer at cost, and then pays a royalty to the Australian label within a specified time frame. This works because it reduces additional freight charges, double handling, and bypasses the duty drawback system, which can be an administrative hurdle for small operators.

By Hansel Dunlop