16 May 2011
3.6 Challenges Facing Exporters
Small Market with Small Orders
With a small population of 16 million and a middle class of less than six million, the Chilean consumer market is rather small, when compared to Brazil, Argentina and Mexico. Given the small population, Chilean retailers usually have in their stores a full spectrum of products, ranging from mostly low-end to a few high-end ones. Against this backdrop, their orders for each single item are usually small. In other words, their order quantity may not be on a full-container-load basis and shipment consolidation is usually required. This may further affect the competitiveness of exporters when scale economies (i.e. cost advantages) cannot be realised due to small order size.
In general, Chilean consumers are conservative. Bearing less sense of showing off, they are also considered very price-sensitive. Chilean shoppers are inclined to pick unbranded and less stylish items, given their more reasonable prices. This habitual behaviour makes it even more difficult for exporters whose competitive edge lies on product design, quality and branding, rather than price competitiveness.
Tyranny of Distance
More than 30 hours’ flight from China, Chile is the most remote market in the world for Hong Kong and mainland exporters. Regarding shipments, it takes 30-35 days for cargo exported from Hong Kong and Southern China to arrive at the major ports in Chile, namely Valparaíso and San Antonio. Logistics control and management may therefore pose overwhelming burdens on small- and medium-sized companies. In addition, comprehensive export financing and insurance will be difficult and expensive to obtain as shipping time and distance are long, perhaps straining the financial supply chain.
Chile, like many other countries in Latin America, is Spanish-speaking. In fact, most people on the street in Chile speak only Spanish, although English proficiency in Chile is considered one of the highest in the region. Granting that the situation is better when it comes to foreign trade business, new-to-the-market businesspeople are advised to appoint a reliable interpreter to accompany them at business meetings to facilitate business negotiations and avoid undesirable surprises.