Sport of all types is "a national
obsession" for Australia. Her national sports are cricket and
rugby, although Australian rules football, European football and field
hockey are fairly popular. Tennis and golf courses, with exquisite
facilities, abound in the country. As 83% of the population lives within
50 km of coastline, water sports such as water-skiing, deep-sea fishing,
sailing, windsurfing, swimming, surfing and skin-diving are dominant
pastimes. Skiing in the southeastern mountains, camping, hiking,
bush-walking and horse racing are also common. The recreation, lifestyle
and sporting goods sectors, expected to be prime growth areas as
Australians enjoy more free or leisure time through reduced working
hours and earlier retirement from the work force, offer a window of
opportunity for manufacturers of sports and recreation goods in
With sound craftsmanship and entrepreneurial skills,
Pakistan enjoys a tradition of manufacturing and exporting world-quality
sporting goods. Her hand sewn sports balls such as soccer balls, volley
balls, hand balls, rugby balls, American footballs, basket balls;
complete range of cricket and field hockey equipment and accessories;
boxing, martial arts, equestrian, polo, saddlery and camping equipment;
tennis, squash & badminton racquets, and sports apparel are a symbol
of quality and excellence in the international markets. This article,
therefore, aims to evaluate the prospects of exporting sporting goods
from Pakistan to Australia.
EXTERNAL MARKET ENVIRONMENT
The family income of the Australians has gradually
increased with the consistent economic growth over the last two decades.
With the GDP per capita over A$20,000, the real income of the majority
has now improved. Inflation & unemployment, at 2.8% & 6.3%
respectively, are low and the real GDP grew by 4% in 2001-02. The
exchange rate has improved against all major currencies making foreign
manufactured goods relatively cheaper for the Australian consumers. It
is stable and stood A$1 = US$0.5696 or PRs34.2523 in June 2002. Moody's
Investors Service has recently affirmed Australia's Aaa credit rating
and stable economic outlook. The Closer Economic Relationship (CER)
agreement between Australia and New Zealand is a comprehensive bilateral
free trade agreement that has removed all tariffs between the two
countries allowing free movement of goods and a wider market in Oceania
now. Currently, Australia is negotiating free trade agreements with
Singapore, Thailand, and the USA too.
Australia was Pakistan's 19th export destination in
2001, and enjoyed a positive trade balance with Pakistan, exporting
goods worth A$477 million & importing merchandise valued A$200
million in the year 2001-02. However, Pakistan came out as Australia's
39th trade partner, contributing to a meagre 0.3% of Australia's total
merchandise trade. The major Australian exports to Pakistan were oil
seeds and oleaginous fruits 'soft', cotton, fresh vegetables, coal, and
animal oils & fat whereas she imported mainly textile manufactures,
woven cotton & synthetic fabrics, clothing and crude petroleum from
Pakistan. The Australian market is highly competitive, growing, and has
a high technology level but low entry barriers.
The public policy towards sports goods has largely
remained lax and the current trend has been towards the reduction of
import duties. Importing goods into Australia requires compliance with
Australian Customs, Quarantine and related laws. Rates of customs duty
and/or sales tax vary according to the type of goods and the country of
origin. Some indicative duty levels are Clothing & Textiles (2000),
25%; Footwear (2000), 15%; boats free to 5%; Guns, free; Plastic Goods
5-15%; Sports Goods, 5%; Fish Hooks, free. With a few exceptions, GST is
payable on all goods imported for domestic consumption into Australia,
usually at 10% of the value of the taxable importation. However, goods
originating from developing countries are largely eligible for tariff
concessions under the 'Tariff Concession Scheme' (TCS).
Customs does not require an import licence. However,
depending on the nature of the goods and regardless of value, owners may
need to obtain permits to clear the goods. Formal Customs clearance is
required for entry of goods above set value limits, currently A$250 for
goods imported by sea and air cargo, and A$1000 for goods imported
through the postal system. Australian Customs only applies duty and
collects the duty where the amount of duty to be paid is or is greater
than A$65. At an applied duty rate of 5% on FOB price, the invoice or
paid value of the consignment can be up to A$1,300 before duty is
collected. Stringent inspection and control is applied to airfreight,
courier and shipping consignments. The goods invariably require a
Packing declaration and a Fumigation certificate for clearance by
Australian Quarantine Inspection Service (AQIS). There are heavy
penalties for not complying with the Customs and Quarantine laws,
especially for false or misleading invoicing, not declaring goods,
smuggling and importing prohibited goods and violating quarantine
Australia has a growing market of around 19 million
literate people, 85% of whom live in metropolitan cities. The states of
Queensland and Western Australia are growing much faster than others (at
approx. 1.8%), and there is a general population shift to the sporty
warmer States, particularly of older people. The population is also
ageing at an increased rate, and less than 50% of the households have
children now. In only 60% of the couples both partners are native born,
whereas over 20% of the population speaks a language other than English
at home. The Australian household expenditure on sports & recreation
rose from A$5.93 billion in 1993-94 to A$7.34 billion in 1998-99,
whereas the per capita weekly spending on sporting, recreation and
camping equipment are highest in Western Australia, Northern Territory
& Queensland. The 1996 population census gives an estimate of
276,000 people employed in sport and recreation industry, whereas 1,581
sports grounds and facilities across the country employed around 21,563
people and generated a business of over A$796 million in 1998-99.
Prior appointments are essential for business
meetings, which run punctual and frequently over drinks and meals.
Meetings are not usually scheduled during the evening or on weekends.
With a history of geographic isolation, and reliance on imported
manufactured goods, Australians are very sensitive to product
reliability and after-sale service. It is important to maintain an arm's
length of personal space during conversation. Dress suits are necessary
in Sydney and Melbourne while Brisbane people often wear shirts, ties
and shorts. Visiting business people should wear light tropical suits
for initial meeting, with country areas being more informal.
MARKET & CONSUMER ANALYSIS
When we analyse the current overall import profile
and the top ten imports to Australia, and the consumer trends, we find
increased opportunities for software & IT services, pharmaceutical
products, medical equipment & surgical instruments,
telecommunications equipment, auto parts, industry chemicals, processed
fruits, vegetables & fishery products, besides textile &
clothing and sporting goods, for the Pakistani exporters.
Broadly speaking, the sporting goods industry-mix in
Australia includes sports equipment, sports apparel and sports footwear.
In 1997, the total world exports of sports goods were estimated to be
around US$9 billion with a growth rate of 7% p.a., whereas the
Australian wholesale and retail trade in sports goods industry grew at
1.9% p.a. and, its net retail sales were worth A$7.75 billion in 1997.
The share of sport & recreation goods is estimated at around A$1.5
billion in the gross merchandise imports of A$119.65 billion for
2001-02. Currently, the market for all kinds of clothing (including
sports apparel) and footwear in Australia is estimated at over A$10
billion, whereas amongst the key sub-segments of sporting goods, a
recent study has put just the Victorian market for fishing gear and
by-products at around A$1.3 billion p.a. There are 550,000 registered
boats (10 ft.+ and over 4 HP) in Australia, with around 129,126
households in Queensland owning at least one boat for recreational
fishing, and the total turnover of the boating sector in Australia is
A$1.34 billion. In terms of Ansoff Matrix, this indicates good
development and tremendous market penetration opportunities for a
Pakistani sports goods exporter in all categories of sporting goods
especially boating, angling, surfing, golf, tennis, squash, soccer and
cricket equipment, and sports apparel/footwear.
The age group 20-44 are the biggest spenders on
sports goods, whereas the majority likes to participate in walking,
swimming, aerobics/fitness, tennis, golf, and fishing activities.
Participation rate in sports and physical activities is the highest in
Australian Capital Territory & lowest in South Australia. Women are
increasingly being viewed as a major segment, and the industry is now
developing and offering a broader product-mix to them. Sportswear is
still largely bought as leisurewear. FIFA has recently granted direct
entry to Oceania for the next soccer world cup, furthering interest and
popularity of soccer in Australia, thereby, stimulating market demand
for soccer balls and accessories.
The Australian market for sports goods can,
therefore, be segmented as given in
SEGMENTATION OF SPORTING GOODS MARKET IN AUSTRALIA
(Health-conscious Functionalists), Relaxed (Pastimes), Greens
(Nature-lovers & Environmentalists), Funky Fits (Hip-Hops,
Hormones & Braces)
Consumer tastes and
Outdoor Active (running,
camping, trekking, bush-walking); Recreational (fishing, boating,
water-sports); Arena Active (cricket, rugby, soccer, hockey, tennis,
Gender / Family
Males / Females (FLYERS:
Fun-loving- Youth-EnRoute to-Success), Families or Couples (DINKS:
Double Income No Kids), OPALS (Old Pals with Active LifeStyles)
15-24, 25-44, 45-54,
55-64, 65+ years.
Amateur / Professional,
Regular / Casual,
By State, Metropolitan
or Rural areas.
Exporters from China, Taiwan & India dominate the
Australian sporting goods market. Import of Chinese-origin sporting
goods valued at A$696 million in 2001-02. Strong competition exists in
all sports goods market segments between Australian distributors and
retailers who vie for the market share and are discussed in the section
on distribution channels. "Bass Pro", a large US retailer,
competes in recreational, fishing/angling sports, offering
catalogue-mail products too. Major competing brands include Adidas,
Reebok, Nike, Dunlop Slazenger, Callaway Golf, Wilson, Daiwa Sports,
some of whom already source from Pakistan for their European and North
American operations. Sourcing from China, India and Pakistan would carry
practically equal factor costs for the Australian market. There are some
competitive barriers for the Pakistani exporters such as the first-mover
advantage of the Chinese or Indian-origin firms and products, better
market intelligence of their exporters, the Australian quarantine
certification requirements and the quality standards, and weak
international branding of Pakistani products. However, the Pakistani
exporters, having sound experience in other developed markets and their
capacity to offer a high quality product at reasonable price, can use
'quality' as a differentiating factor to ward off this competition.
MARKET ENTRY OPPORTUNITIES
The use of agents and distributors is the common way
to sell products in Australia. Because of market size and geographic
remoteness, it is common practice for Australian distributors to ask for
exclusive geographic and/or product rights. Prospects exist to explore,
negotiate, and launch "Private Labels/In-house store brands"
with the major retail chain stores (e.g. David Jones, Grace Brothers).
At present, direct export and piggybacking through sales agents,
merchant distributors and retail chains is being suggested to enter the
market, before considering any deeper involvement such as local
warehousing or subsidiary operations. Franchising, licensing, joint
ventures, and direct marketing may be beneficial alternative market
entry techniques in the long run, but entail more investment and
commitment. To explore such likely opportunities, it may be advisable to
visit Australian International Franchising & Business Opportunities
Expo in Sydney (March 21-23, 2003) or Melbourne (Oct. 3-5, 2003), or
Australian Toy & Hobby Fair (ATHF), scheduled for March, 2003 in
Direct export through use of indirect channels such
as local distributors, importers or sales agents is initially preferred
to reach the Australian consumer. Although there are a number of
importers and distributors, sports goods' retailing is still somewhat
diverse and fragmented in Australia. A few independent specialty stores,
and national specialty and sporting goods stores (sports multiple
chains) dominate the market, along with some supermarkets, concept
stores, non-specialist retailers and internet retailers (e-shops).
Sports Stores primarily concentrate on the active
sports and offer a full range of equipment and clothing. There are
specialist sports goods retailers for firearms, hunting and angling
products, such as "Compleat Angler" which offers specialist
angling products through a broad country-wide chain of retail stores and
a significant mail order client base. Specialty Stores, such as
"Barbeques Galore" carry specific and/or combinations of
product groups, and are positioned and marketed as "camping and
outdoor leisure stores", mostly with a focus on a particular
sub-segment. The larger Concept Stores are run by a particular supply
house (such as "Rebel Sport", Sports Power", "Sportsco",
"GotOne"), manufacturer or brand name (such as
"Nike") and are either stand-alone stores, or located within a
large department store. The largest retail group in Australia, both in
turnover and number of stores, "Coles Myer Ltd." has sports
concept floors in its major department stores.
Catalogue and mail/phone order selling, a common
distribution channel aimed at encouraging "in-store visit" and
purchase, is the key to access the Australian consumers. Catalogues and
brochures may also offer web links for electronic sales of sports goods.
Direct retailing and marketing by manufacturers, using low price as a
key strategy, is also increasing rapidly.
The sports goods retailers usually work on margins
ranging from 100-150% at the top end, but many popular and competitive
products are discounted and sold at margins closer to plus 65%.
Transport costs to and within Australia are a significant part of
distribution costs that must be covered by the importer/distributor or
retailer. Air/sea cargo from Karachi to Sydney will invariably require
trans-shipment via Hong Kong or Singapore. Karachi - Sydney Ocean
freight is around A$620 per cubic metre.
In view of the above discussion, we can now summarise
the prospects of exporting sporting goods by a Pakistani firm to
Australia in the matrix as shown in Table 2.
2. Entrepreneurial skills.
2. Cheap & skilled labour.
3. Exquisite traditional
4. High Quality standards
5. Established niche in the
developed markets of EUand North America.
Post 9/11 country image!
2. Relative small-size firms
with capital constraints.
3. High utilities, transport,
and ancillary costs.
4. Inadequate market
5. Weak international branding.
6. Late mover to the Australian
7. Weak web presence and poor
2. High growth market
3. CER agreement with New
4. Proximity to wider Oceania
& South East Asian markets.
5. Market presence in the
forthcoming FTAs with Singapore, Thailand, USA!
6. JV & Licensing
7. Export Trading Companies!
(bypass problems of size, capital, outreach.)
Strong domestic and international competition.
2. Australian quarantine
requirements, labour & quality standards.
To conclude, the Australian sporting goods market appears to be in
the growth stage, with high market and sales potential. The active,
sporty life style of a largely urban, growing multiethnic Australian
population, with higher purchasing power, in a growing economy with
sound infrastructure and developed distribution channels, present
potential business opportunities in the sporting goods industry for a
Pakistani exporter. All this makes Australia an attractive market, and
a favourable export destination that has so far been ignored because
of various reasons. As our established European and American market
get saturated and increasingly competitive day by day, it is
imperative that we diversify into new geographic markets at priority
basis. In the light of the preceding paragraphs, Pakistani exporters
must endeavour to explore the tremendous opportunities in the
Australian market and fine tune their individual product-market plans