Entering the market
Traditionally, the preferred method for entering the market has been to use an agent or distributor. Before appointing an agent or distributor, due diligence should be undertaken. Agents’ rates typically range between 7 to 15 percent of the wholesale price.
However, increasingly New Zealand companies are establishing a physical presence in Australia. Exporters with an in-market presence can take better advantage of networking opportunities and identify and respond more quickly to changes in the business environment and customer trends.
Franchising is another option and is popular in Australia. In contrast to New Zealand, there is specific legislation in Australia that relates to franchising.
Pros and cons of an in-market presence
Advantages of establishing a business in Australia include:
- physical location in the market gives direct access to end-users
- enhanced relationships with local channel partners
- access to local knowledge and expertise
- positive stepping-stone for third market access, such as the United Kingdom, the United States or Asia.
Disadvantages include:
- the Australian business start-up process is more complex and costly than that in New Zealand
- Australia's business environment is more formal, competitive and bureaucratic.
Setting up a business in Australia
Australia is a single market which is more than five times the size of the New Zealand market. Sydney is the largest city but also the most expensive one. For example, office and rental costs in Adelaide are up to 50 percent less than equivalent offices in Sydney.
If you open a business in Australia you need personal, professional and business insurance to protect against litigation by customers and business partners. This type of insurance is vital for reducing financial risk in a climate that is moving towards the American system of litigation.
Australian tax regulations tend to be more onerous because of their greater scope and administrative complexity. The business structure you choose to use in Australia will determine your Australian tax obligations. Professional legal and accounting advice should be sought. A simplified tax system is provided to assist companies with an annual turnover of less than A$1 million.
While the Australian and New Zealand markets appear very similar, there are subtle but very real business and cultural differences including large distances between main centres, the size of the middle class and the relatively high average income.
