Looking to expand your business across the Tasman? John Heng and Greg Muir relate contrasting stories.
KEY POINTS:
If you run a small business and you're full of enthusiasm about expanding across the Tasman, stop reading now.
Well, maybe you should keep reading, but be warned: Click Clack group chief executive John Heng is famous for being frank.
The 65-year-old recently signed another five-year contract with
the plastics manufacturer but, in an ideal world, he'd probably prefer to be strolling along the shores of Lake Michigan or maybe the Thames.
As it happens, he is still spending quite a bit of his time in Adelaide, where Click Clack Australia is based.
The Palmerston North-based company expanded across the Tasman 11 years ago and, in short, it has been a nightmare, says Heng.
Click Clack exports to more than 70 countries and Australia has been one of the hardest to break into, he says. "The tax system, the state government system, the local body system, the federal system, is all different. We actually trade easier and better in the US than we do in Australia."
Although he is very fond of the place, he finds it tough being an importer.
Click Clack might now be embedded in Australia - "just like in Iraq", he jokes - but it's still regarded as a foreign company. "And being a foreign company really is a long haul in getting where [our competitors] are."
In 1996, it decided to test the market in Sydney using a couple of distributors. Encouraged, it bought two businesses in Adelaide the next year.
Heng would have preferred to move to Sydney, but one of the businesses had a lease it couldn't get out of, and it would also have had to repay a $750,000 grant from the South Australian Government to stay within the state.
Competitors didn't seem too worried when it was using a distributor, but once Click Clack based itself in Australia they became very aggressive indeed.
"The attitude is 'if we can't do it in Australia, why the hell would we buy it from New Zealand?' ... Australians are very, very nationalistic. Unless it's better and cheaper, they're not interested."
Heng has avoided hiring Kiwis for management roles in Australia. Although he spent eight years there running the Australian operation, which has 500 staff, he deliberately kept out of the limelight and let his Australian staff deal with other Australians.
And forget about level playing fields, he says. Australians still heavily subsidise some industries, they still believe in the old boys' network, and they will use "everything in the book" to make it difficult for a new competitor.
"Any Kiwi that goes in that wants to work with a Kiwi company - and there's a lot of them - has to be at least five times better than an Australian. That's the Australian level playing field."
All Click Clack's products are imported into Adelaide and distributed from there, which is not as costly as you may think, says Heng. "To be quite honest, it costs you more to go from one side of Sydney to the other than it does from Adelaide to Sydney."
But it does frustrate him that around a quarter of the company's containers get held for examination by Australian Customs for up to 10 days, even though it has been accredited under a supposedly seamless transtasman scheme and its shipments are identical each week.
Taking into account all the logistics involved, it generally takes at least seven months to see any cash from the time the raw material for the products is bought to the time the customer pays the bill - the same as the US, which is much further away, says Heng. That lack of cashflow can put considerable strain on a fledgling business, he notes.
In fact, Click Clack made losses for the first three years it was in Australia.
"In the long term what we've done in Australia is survived. Our experience for the last 10 years has been all uphill. We're not giving up, but it's not an easy path to take."
Pumpkin Patch chairman Greg Muir is better placed than most to offer advice to anyone considering entering the Australian market.
Muir lived and worked in Sydney more than a decade ago when he was with logistics company TNT, and was CEO of The Warehouse during its disastrous dalliance across the ditch.
Like John Heng, he rather likes the Lucky Country and might still be there now if it weren't for family ties. But unlike Heng, he doesn't believe the Australian market is a particularly tricky one - if you do your homework.
Muir has never spoken in detail about exactly what went wrong with the Warehouse. However, it is widely known that in the end he and Warehouse founder Stephen Tindall did not see eye to eye over its Australian strategy.
It's been quite a different story with Pumpkin Patch. The children's clothing retailer just opened its 100th store across the Tasman, with sales there accounting for almost half its $365 million turnover in the past financial year.
The chain was well entrenched in Australia long before Muir joined the company, and he describes it as an "absolutely excellent business" that's in "outstanding shape".
Muir believes too many New Zealand businesses overcomplicate their Australian strategy and he doesn't buy the argument that the regional differences can be bewildering.
"It's no different than going into the US or China or anywhere else. It's really simple. You have to know there is a market niche available for you and know exactly what you want to be and then go about executing that strategy extremely well."
The challenges are largely at the start, says Muir. It is vital, he says, to thoroughly research the competition and what will be different in the business landscape, including supply chain issues, regulatory issues and whether competitors will treat you the same way they do in New Zealand.
Muir insists Australians are not as hostile to foreigners as some people seem to think. "At the same time, unless there is something particularly Kiwi about your business then it doesn't necessarily make sense to highlight that. But I don't think being a Kiwi company is necessarily a negative to Australian consumers."
Australians, like Americans, do tend to be more patriotic when it comes to buying locally made products, he concedes. But as more manufacturing shifts to Asia, that's becoming less of an issue globally. People are now looking for brands and quality, rather than where something is made, he believes.
Where Kiwi companies sometimes go wrong is they assume that because they've succeeded in New Zealand, they will also succeed in Australia.
"For Pumpkin Patch, there clearly was a niche for us. We've managed to move into that niche and play a very big part in the kidswear market in Australia and we continue to be relevant to Australian consumers. If you look at the failures, it's normally because they haven't had that opportunity and the owners got there and it wasn't as good as they thought it was, or the other scenario is there actually was a niche for them but they got over there and did a really bad job of executing their strategy."
Acquiring the number two or three player in the market - think AAPT or Ansett - has also proved far from reliable. "There's no doubt the Australians are tough competitors and sometimes that's one of the things Kiwis underestimate. You're not going to get handed the business on a plate - you've got to go out there and fight for it."
Other businesses with experience across the Tasman agree that getting to know the market is vital.
Niche milk company A2 Corp admits it made a big mistake when it tried to enter Australia, by licensing its product to a licensee who had complete control.
"From what we've seen that just doesn't work," says CEO Anthony Lawler. "You've got to have skin in the game."
A2 repeated the mistake before settling on a joint venture with Freedom Nutritional Products, which now distributes its products in more than 1000 stores.
"Make sure not that your joint-venture partner wants you, but needs you. You need to be sure of that 150 per cent and, if not, move on."
As general manager of Australasia for IT company Gen-i, Rhoda Holmes spends two weeks of each month in New Zealand and two in Australia.
Doing business in Australia is like fly fishing, says Holmes: you need the right fly, the right location and plenty of patience.
Yes, Australians have a strong nationalistic psyche, so be prepared to love them or leave, she says. And no, you can't guarantee an objective referee, so it helps to make "big friends" - winning over the people that count.
"Being different is important, but being better is even more important."
