The global BBF imports into the thirty main new markets will increase to 136 billion euros in 2017 (values at constant 2010 prices and exchange rates). That is 44 billion more than in 2011, an increase of 48% in six years.
The growth of global BBF imports between 2012 and 2017 will be absorbed by over 30% by Russia, China and United Arab Emirates, the three new markets which along with Poland, were exerting the most significant influence on the global demand for BBF. In 2017 a goods import level over 20 billion
(Note 7) is foreseen whilst China, the second global BBF importer, will exceed 10 billion. An intensive growth, large enough to double the import volume of BBF products over the next six years, is also expected in India. Amongst the other Countries which have the most significant incidence on the demand in the same period, Malaysia, Kazakhstan, United Arab Emirates, Saudi Arabia and Brazil show a particularly high percentage increase.
(Table 12.2.1),
(Figure 12.2.1)
The growth expectations for the demand of BBF products which are so large in the new markets (from 2011 to 2017 48.2% compared to 27.3% of the mature markets) relate to the socio-economic transformations in the areas which have already been mentioned. In particular, the improvement of the per capita income favours the formation of a well-off class whose preferences and consumer choices can be intercepted by means of the type of good subject to analysis.
(Note 8)
Amongst the first 10 new markets importing BBF, Veneto shows a relatively high market share in Russia, the Czech Republic and Poland, whilst the Veneto region accounts for 1% out of the Chinese BBF imports and much less in areas like Kazakhstan and Malaysia for which, as previously mentioned, an intense growth in demand has been forecast. If the 15 new markets which are most relevant to Veneto BBF exports are taken into consideration, Veneto's market share is shown to be more considerable in Croatia and Tunisia and it is also shown that with a few exceptions (China, United Arab Emirates, Saudi Arabia and Ukraine) it involves areas where the BBF demand is expected to increase less than in the total of the new markets.
BBF Food
(Figure 12.2.2),
(Figure 12.2.3) Amongst the main BBF food importing markets Veneto's market share shows a higher value in relatively close Countries like the Czech Republic and Poland, whilst Russia is in third place. Amongst the most distant markets, a relatively high index value stands out for Brazil, whilst the share is 0.5% lower in China, Thailand and Mexico.
With regard to the new markets which are more important for the Veneto exports in this sector, a more consistent growth in demand is expected in China and Brazil, whilst a higher incidence of Veneto on the demand is recorded in Croatia and in some Central-Eastern European Countries (the Czech Republic, Hungary and Romania). Overall in 2017 the Veneto exports in Russia should reach 64 million euros while those towards the Czech Republic should reach 56.
The good entry onto the Brazilian market is due above all to the wine sector which represents the Veneto BBF leader food product in the mature as well as in the new markets. If it is important to continue to proceed along this path in order to strengthen the success of wine in Brazil and reapply it in other rapidly growing markets. A greater product differentiation is also necessary in order to aim at a broader spectrum of BBF food entry. The biggest difficulties in pinpointing the dynamism of the demand particularly originating from some Asiatic Countries are common to Veneto and Italy: in addition to the limits of transportability and perishability of products they are often subjected to various types of obstacles (tariff barriers, health or bureaucratic restrictions) which are particularly burdensome for the small and medium enterprises. Moreover, the lowering of cultural barriers linked to the different food habits, the presentation of the product, the availability of suitable distribution channels and the protection against the risk of forgery are crucial aspect if compared to the often insufficient initiative of the single (often small) producer. In reference to this, the results of a recent survey carried out by Fondazione Nord-Est and Friuladria Crédit Agricole
(Note 9) on a sample of food businesses of the Triveneto are of interest: half of the respondents showed that for a small enterprise to remain competitive some forms of aggregation are necessary (consortia, joint ventures...), whilst 12.5% spoke of real merging of companies.
(Table 12.2.2)
BBF Clothing
(Figure 12.2.4),
(Figure 12.2.5)
In 2011 the market share of Veneto clothing BBF amounted to 3.2% in Russia, the first importer of the section. This market share which is high if the size of the market is taken into account, shows the ability of the Veneto businesses to intercept the demand of the consumers whose tastes are becoming even more sensitive to the BBF quality, especially in the specific fashion segment. In 2017 Veneto could export almost 280 million euros in BBF clothing to Russia, showing a total increase of around 87 million euros over the next six years.
Amongst the other importing Countries the Veneto region share amounted to 2.8% in Ukraine and was recorded as between 1 and 1.5% in China, Poland and Mexico. Even more modest values were assumed in other areas characterised by good growth expectations. Entry into China, which also represents a market of great interest, is limited by the difficulties connected to approaching Countries which are geographically and culturally distant and to the research of reliable local partners which favour the entry channels of the products.
Amongst the other main new end-markets, Ukraine the United Arab Emirates and Saudi Arabia also stand out, Countries where Veneto's market share is still extremely low but for which a relatively sustained growth in demand is expected.
(Table 12.2.3)
BBF Footwear
(Figure 12.2.6),
(Figure 12.2.7) In the new markets footwear is seen as an essential fashion accessory and has been asserted more recently than clothing. In the Chinese market, for example, the association of the product with comfortable fitting rather than the beauty and creativity of the design and the medium-level market has driven by Chinese producers. In general, other obstacles to the entry into new markets can be traced back to distribution channels which are often hard for the small and medium enterprises to be accessed.
Despite this, in more recent years in China as in other emerging economies, the consideration of footwear as a look qualifying factor to be combined with clothing involves a bigger and bigger part of medium-high range consumers. The Veneto businesses seem to have understood this change in prospects. In 2011 the weight of Veneto on the demand of the main new BBF footwear importing markets amounted to 10% in the Czech Republic
(Note 10); Croatia and Poland followed, areas on which the Veneto demand impacted by around 5%. The Veneto BBF footwear impacted on the demand from Russia and China by 3% and 2% respectively.
As has already been observed in the other sections, the Veneto region still weighed less on distant but promising markets such as Malaysia, Kazakhstan and Chile. Amongst the new markets which were more important for Veneto exports the market share was much higher in the aforementioned Czech Republic, in Romania and Bulgaria. On the other hand, the growth expectations on the demand were more optimistic in Ukraine where the weight of the Veneto exports in 2011 accounted for 3%, for the United Arab Emirates, Saudi Arabia and Kazakhstan, markets in which as already observed for clothing, the entry ability of the Veneto BBF was still very modest.
(Table 12.2.4)
BBF Furniture
(Figure 12.2.8),
(Figure 12.2.9) In 2011 Veneto BBF furniture export accounted for 12% out of the demand from Russia, the first new BBF furniture importing market. This increased incidence confirms the Russian consumers' interest in design and quality furniture. In the Russian market Veneto exports for the sector could reach over 340 million euros in 2017, with an increase of over 120 million euros compared to that of 2011. The weight of Veneto on the other main new importers was more contained but still significant: 3% in Poland, 2% in the United Arab Emirates, Saudi Arabia, the Czech Republic and also in extremely distant markets like India and China. In the main new markets of Veneto exports, the region showed a market share which never dropped below 2%. It was particularly high in Russia, as previously mentioned, but also in Ukraine, Croatia and Romania. Moreover, amongst the most important new end-markets India, Kazakhstan, Saudi Arabia, China and United Arab Emirates also revealed good growth demand prospects.
The consolidation of Veneto's position on the growing markets, even in this case, needs a structured strategy that single and small enterprises are often not able to sustain. Furthermore, Veneto entrepreneurs in this sector seemed aware of the necessity to overcome the obstacle of the small size
(Note 11) in order to assert themselves on the new and complex international markets.
(Table 12.2.5)
Trade fairs
The fairs have a primary role because they are often the first chance for businesses to enter foreign markets. Even businesses of smaller dimensions which are prevalent in the BBF sectors can easily reach the potential clients through the fairs: specific surveys
(Note 15) show that by participating in a trade fair a SME can develop 50 useful contacts on average, 30% of which become sales relations. The opportunities are numerous considering the fact that over the last three-year period the new markets hosted over 250 ventures in the BBF sector each year
(Note 16). Over a third are concentrated in China and Russia which hosted 42 and 25 trade fairs respectively, but the opportunities to explore new commercial horizons involved also Countries which are still marginal for Italian exports because they benefit from a strategic geographical position.
The advantages of the trade fair system are developing relations and familiarity with these markets as well as collecting orders immediately. With over 90 trade fair events, food is the most active sector because it is called to exceed the major cultural barriers in some distant Countries. The opportunities are also great in other sections, with around 60 ventures each for clothing and furniture and 41 for footwear.
(Figure 12.4.1)
The national trade fairs are equally important. In the food sector, participation in Cibus di Parma (one of the sector's most important in the global field) guarantees an exhibition to at least 5 thousand foreign visitors, over 10% of the total affluence. Even larger percentages in the other sectors where, for example, the foreign visitors constitute 50% at MICAM (out of the 36 thousand present), 39% at Pitti Immagine Uomo (out of 24 thousand) and almost two thirds for the 280 thousand present at the Furniture show in Milan. The Veneto region hosts the International Luxury Hall in Verona "Luxury Yachts" and the "Vinitaly", displays of BBF excellence. Added to these, for global significance, the EXPO 2015 project in Milan which in terms of number of visitors (over 20 million expected) and matching of the theme with the BBF values represents a unique chance for promotion of the image of Italy and of its products in the world.
The distribution channels
Experience over the last years shows how the understanding of distribution circuits constitutes an important indication of success and permanent duration in the new markets.
Understanding the method and way in which the BBF products become available to the new consumers and how the buying habits are changing in the various Countries is an important prerequisite for putting an optimum entrance strategy in place. When compared to the competitors the Italian BBF businesses often show a gap in their knowledge which derives firstly from a low level of internationalization of the Italian distributors. Furthermore, they are not normally the first mover on the new markets and therefore have less experience.
This lack can be penalizing for the Italian businesses, particularly in the food sector since it deprives BBF products of important windows on to the foreign markets and of the opportunity to get to know the consumer style of the new market through the Italian distributors.
The national retailers invested little abroad as a result of their small size but probably also due to less innovation in the offer. A greater inclination towards a foreign presence can be found in the franchising distribution in which the lessons are making a move towards internationalization even if for now the opening of sales points is focussing on geographically closer markets (with few exceptions).
Do not be surprised therefore if in the classification of the main distributors on a global scale, the first Italian distributor is found only in 52nd place (Coop Italia) with a limited international projection in terms of number of Countries and geographical distance. At the top are the colossal Wal-Mart and Carrefour, the latter with new openings in over 30 Countries and a foreign turnover which represents almost 57% of the total turnover. These are followed by the German Metro which produces 61% of its turnover on foreign market and appears in over 30 Countries and the English Tesco, with 33% of sales carried out abroad and present in 13 Countries. These are the most active businesses on the internationalisation front, together with Ikea, Zara (Inditex), H&M to cite a few relating to furniture and clothing products.
Given that the large chain stores speak little Italian, BBF businesses must compensate for this lack in an innovative manner in order to find sales channels and intercept the preferences of the new consumers. In the fashion sectors the experience has shown that a suitable strategy for entering the new markets is the development of a network of one-brand sales points, a system which allows a greater degree of control on the pricing policies and the marketing and communication of the brand but that is burdensome in terms of investment. In some Countries these initiatives are obstructed by a complex geography and by the insufficiency of the logistical infrastructure and transport. As an alternative, the entrance into new markets can be entrusted to agreements with local distributors but in this case there is less control over the market and selecting partners is crucial.
In the food sector however, educating the consumers and introducing them to the product is fundamental. One of the most widespread strategies for entering new markets passes via the Ho.Re.Ca. and travel retail channels
(Note 17) and only later via the circuits of retail distribution. In China the consumption outside of the home has increased and the approval of ethnic and also Italian catering which seems to have a better quality/price ration compared to that of France is growing.
On the other hand, the distribution to foreign sales contribution in the furniture sector is more complex. Combined with the lack of big national retailers is a certain difficulty for the smaller sized industries in the structuring of their property sales networks or direct relationship with the property sector. Over time Italian businesses have developed innovative solutions (the typical case of the contract) but the contribution of local distributors and above all their degree of reliability remains fundamental for increasing the entry into the household market.
Indirect vehicles: tourism, immigration and cinema
There are other elements that directly influence the success of BBF: tourism, immigrants and the cinema. In the case of tourism, the visit of foreigners to Italy and Veneto is in fact a primary channel of contact between foreign demand and internal offers. This is particularly the case for goods which tourists come into contact with during their stay: everything from delicious cuisine to dressing well and from urban to hotel furniture.
Immigrants should be considered as ambassadors of the Italian and Veneto BBF: the immigrant population can represent an important bridge between the Italian products and the communities of origin. Thanks to new technology but also to more and more accessible transport frequent contact with the homeland can consequently be transformed into opportunities for exchange and promotion of the Italian BBF in the Country of origin.
TV and cinema help raise awareness and reduce distances, promoting images of the "Belpaese", its fashion and its design objects throughout the world. Cinema can be seen as a window that provides bigger opportunities in the new markets and allows an increase of sales concerning everything from the élite to an average class which is constantly increasing in size and from the capital to the provincial cities which would be harder to reach with other forms of publicity.