Three entrepreneurs speak candidly about the huge opportunities and challenges when exporting to the Gulf States.
The Syrian crisis rages on unabated. The Arab Spring continues to cause unrest across the Middle East, from Lebanon to Oman. And yet British firms are successfully exporting to the region, overcoming political and cultural barriers to tap into a lucrative and fast-growing market.
= The Middle East is open for business =
Michael Oliver is the founder of Oliver’s Valves, a 35-year old British manufacturing company that specialises in making valves for the oil industry. The Middle East is one of his biggest export markets, accounting for 20pc of the company’s £90m revenue. “Next year, contracts in the Middle East will make up a quarter of the business,” he said.
Mr Oliver has spent more than a decade building up relationships across the region. His company is the official supplier of valves to Saudi Aramco, one of the biggest oil corporations in the world and has negotiated multi-million pound contracts with the gas gathering plants in Oman.
“I got on airplanes and I tramped the boards to win the business,” he said. “Made is Britain is hugely respected in the Middle East. There’s a high regard for our workmanship. That opened a lot of doors.”
Mr Oliver now has an office in Dubai to service the firm’s clients in the region. “It’s vitally important for any exporter to have boots on the ground with their own people in the Middle East,” he said. “You must also be be in the same time zone as your customers. You cannot sell by remote control.”
Despite all the headlines warning of ongoing strife across the Middle East, Mr Oliver has experienced “no problems” doing business over there. “But Syria is a negligible market for me,” he admitted. “In Dubai, the UAE, Oman and Saudi Arabia, the climate for doing business is stable. I’m not forecasting problems for the business, even if the situation does get worse.”
= A technological revolution =
Internet usage across the Middle East is up 2,639pc over the past decade compared with 393pc in Europe, according to Nielson’s latest Internet Usage and World Population Statistics. Saudi Arabia has now become the world’s largest consumer of videos on YouTube, with 40pc of the population visiting the site every day and 70pc accessing YouTube at least once a week. Mobile phone ownership across the Middle East is also 19pc higher than the world average.
“There has been massive online growth in the Middle East, which has created incredible business opportunities,” says Rasha Khouri, founder of luxury goods e-commerce company DIA-style.com.
Ms Khouri launched the online shop in September 2012. The site acts as a middleman for big luxury brands like Harrods, Net-A-Porter and US fashion giant Shopbop to sell their wares to the Arab States. The site translates all product information into Arabic and features lifestyle articles and fashion content tailored to the site’s customer base. It takes a small percentage of every transaction and operates a VIP service which costs between $100 to $300 a year (£64 to £192).
“When I first launched the website, it was in English,” said Ms Khouri. “But traffic and user engagement is much stronger, more active and loyal since switching to Arabic.” Indeed, Google (NasdaqGS: GOOG - news) announced in December 2012 that Arabic was set to be the fourth most important language on the web by 2015, after English, Chinese and Spanish. “If you’re selling online in the Middle East, it’s really important to have an Arabic website,” she said.
But it’s not always easy being a pioneer in a new market. DIA-style.com has run into some challenges along the way. “The biggest issue for us is that customers are afraid to put their credit card details online,” explained Ms Khouri. “In the Middle East today, about 75pc of purchases are still done cash on delivery.”
Ms Khouri has made some unorthodox business decisions to cater to this new market. “One customer didn’t know how to put her card details into the website,” she said, “So she took pictures of her card, front and back, and texted them to us so we could make the transaction for her. Can you imagine that happening in Europe?”
The entrepreneur’s flexible approach to doing business in the region has paid off and traffic to the website has been growing 50pc every quarter since inception with an average basket size of £375.
= Barriers to growth =
The Middle East may be brimming with opportunities for canny British firms but some entrepreneurs feel that the UK Government is not doing enough to help them access this export market.
Neil Purssey is an inventor and founder of Fireco, which manufactures fire safety products. “We make wire free alarms and sensors that can be attached to doors so that they automatically open at the sound of a fire alarm,” he explained. Two years ago, Fireco was invited to tender for a series of contracts in Kurdistan a pipeline of work which is now worth $8.5m.
But the road to exporting success has not been smooth. “Government makes it impossible for Iraqi Kurds to come to the UK,” said Mr Purssey. “While I endorse and abide by the Bribery and Corruption Act, one of the few sales aids we can legally provide are visits to our businesses in the UK.
“A 73-year-old Kurdish engineer and his wife were recently refused a visa,” he continued. “Everyone is a Daily Mail reader these days and thinks that any visitor from Iraq will refuse to leave. What’s most bizarre is that this man’s uncle was a Brigadier in the British Army in Kurdistan in 1958.”
Mr Purssey is currently lobbying government to adopt a bond scheme whereby companies can sponsor visitors from outside the UK. “If they abscond, the company will pay £1,000 a day to a maximum of £50,000,” he explained. “This would ensure that they do not overstay their visa, and could guarantee a huge contribution to the social service pot if it was to happen.”
Mr Purssey’s criticisms are echoed by Oliver’s Valves’ Mr Oliver. “The big disappointment for me is the Government’s export ban on Iran,” he said. “We have been told that we are not to do business in the country because of political reasons. This is a great pity for me. Iran is the greatest player in oil in the world and needs our valves. We could generate a lot more jobs here in the UK by exporting there.”