What recent challenges have affected global business, and how have they influenced the outlook for international trade?
The pandemic marked a turning point for global business, altering how people live and work and triggering a surge in ecommerce activity. Despite the boom in orders, cross-border trade was hugely impacted by stringent lockdown measures and transport restrictions. There was even concern about the potential transmission of the virus through goods themselves. Thankfully, we’re past the worst of it, but we’re still seeing the effects as governments worldwide focus on safeguarding their borders.
This new dynamic isn’t necessarily all about protectionism; rather, it’s grounded in governments’ need to understand what enters and exits their borders for both security and fiscal reasons, creating a massive data requirement.
Following Brexit, we now have to trade with the European Union in the same way we trade with the US. The EU wants data; the US wants data. Whether we’re in or out, the ask is the same. Setting up those data pipelines between countries to identify what’s moving where has been an enormous technical challenge because we’ve had to build those channels and get customers used to moving data as well as goods, but providing we get the data right, now that we have those pipelines in place, we are fairly resilient to global shocks.
How are businesses adapting to trade-related challenges?
For the most part, we’re seeing that businesses which are accustomed to exporting are continuing to stay well-informed about the shifting landscape and new rules. Most updates are announced in advance, and our customers are engaging in discussions with us on how to prepare for upcoming legislative changes.
Many have adapted effectively by configuring their inventory and websites to capture essential data for international trade. Meanwhile, more advanced companies are partnering with us to invest in duties paid and clearance services, removing friction for customers. To further enhance the customer experience, we, in the industry, are investing in improved connections with other postal services and couriers, enhancing features and data exchange for senders and recipients. This includes tracking packages, redirecting shipments, and delivering to neighbours. So, all those benefits consumers would expect with a local-to-local delivery are now being rolled out for international deliveries.
Why is now a good time for domestically focused businesses to start exporting?
There’s no denying that the financial turmoil in the UK, especially the strain on the cost of living, has put pressure on people’s budgets. As a result, shoppers are naturally placing fewer orders.
More broadly, though, retail and ecommerce are holding up well. While it’s rare for the entire world to experience a shock simultaneously (Covid-19 being an exception), there are usually some areas experiencing growth and others facing decline. Diversifying into multiple markets offers businesses a natural hedge against problems in any one region.
Not to mention the added benefit that customers ordering from abroad tend to buy larger baskets to minimise delivery charges, upping the potential for repeat orders of substantial parcels and providing a significant markup and additional margin. This extra revenue can make the difference between growth and decline at home.
Which markets are experiencing demand growth or interest from businesses looking to expand?
We’re seeing a significant uptick in volumes to the US due to its longstanding trading relationship with the UK, considerable expat community, and consistent growth.
Then there are emerging markets, and markets where there’s lots of bilateral trade. China, for instance, produces a vast number of products that are bought in the UK, and there’s a consistent flow of samples going back. Thriving business relationships have not only spurred the demand for UK products in China but have also been amplified by the continuous movement of people between these two nations. Similarly, a large expatriate community in the Middle East has emerged, driving demand for familiar brands from their home countries, with a strong emphasis on luxury goods in specific regional markets.
Another compelling market to keep an eye on is India. Fast emerging as the next economic and manufacturing powerhouse, there is a strong enthusiasm among Indian exporters aiming for the UK market, matched by UK exporters actively exploring opportunities within India. These exciting developments are underpinned by established historical ties and connections with the Indian market.
What are some of the key exporting trends that will shape international trade in the next few years?
Continued scrutiny at the border is one of the key themes, so data will be an ongoing and increasingly essential requirement. Businesses should expect governments to request digital data on shipments, even before they leave the UK, which may pose challenges for traditional practices like stamping items with handwritten addresses. Fortunately, global courier services are heavily investing in improving these critical data flows worldwide.
Another theme is recovery. We’re encouraged to see the travel industry bouncing back swiftly post-Covid. Some high-volume routes now have more flights than before the pandemic and the rest of the world is catching up. Royal Mail primarily relies on passenger planes for environmentally friendly shipping, and this positive trend will likely lead to reduced costs and faster delivery times, especially for the middle mile.
The third clear trend, which should come as no surprise, is the growing focus on the environmental impact of exporting, particularly over long distances. The postal industry is collaborating with the air industry and other major players to find efficiencies and pull out carbon where possible, whether that means electrifying our fleets, consolidating our movements or investing in new technologies.
For more information on how Royal Mail can help you export with ease, visit royalmail.com/exportingmatters