Many businesses, from start-ups to large corporations decide to expand their business on an international scale. Strategies vary according to the company, its management, the target county and its political, economical and cultural context. There are several elements which must be taken into account in order to achieve successful growth overseas. Spain is no exception to the rule! In this article find out 5 things you should know before attempting to enter the Spanish market:
 
The revival of the Spanish market
 

1. The Spanish market: the post-crisis revival

 

The 12th most powerful economy in the world and 4th in Europe, Spain was deeply affected by the world economic crisis in 2008. The country quickly fell into a recession, and the unemployment rate increased continuously to reach an all time record high of 26.02% in January 2013.

However, towards the end of 2013, the hellish downturn seemed to be over for the Spanish market. Growth became positive once more and today its reaching levels which are twice the eurozone average (+3,2% in 2016 compared to +1.7% over the whole of the euro zone). The unemployment rate is still very high (around 18% at the end of 2016) but it is lowering continually as 1.2 million jobs have been created since 2013.

The purchasing power of 46 million Spanish citizens has increased, domestic demand has boosted and companies throughout the Iberian Peninsula have resolutely turned their attention overseas. The UK is Spain’s 4th largest export market: trade between the two countries was worth over 35 billion dollars in 2015. Spain exports far more to the UK than vice-versa.

It is also worth remembering that Spanish is the 2nd most spoken language in the world, after Mandarin and just ahead of English. The Spanish market has a privileged gateway to Latin America, most South-American companies choose to locate their European head office in Spain.

Madrid also benefits from a great deal of entrepreneurial vigor, said entrepreneurs being generally more qualified than those in London or Paris.
 
Which industries in Spain are the best ones to target?
 

2. Spain’s preferred industries

 

Spain’s main industries differ somewhat from the UK’s: agriculture represents a much larger proportion of the GDP in Spain and services on the contrary contribute a little less to Spain’s GDP than to the UK’s.
2.5% of the GDP comes from agriculture, 22.5% from industry and 75% from the services sector. As far as Spanish industry is concerned, the metallurgical industry, the cement industry and the chemical industry are all key. Automobile, railway and naval industries are also important. As for finished products, textiles is the industry leader, while the food sector is buoyed up by olive oil and wine.

However, in addition to those mentioned, there are several other industries with good future prospects for Spain:

  • Energy: still very dependent on other countries (imports still make up more than 78% of Spain’s energy needs) and centred around fossil fuels, Spain committed to a Renewable Energy Plan several years ago and wind and solar power represent an increasing part of energy production.
  • Aeronautics: The Spanish market is the 5th largest market in Europe in terms of the aeronautical industry’s sales revenue. This industry has been growing steadily for over 10 years.
  • Biotechnology: Spain is home to the largest number of biotechnology companies in Europe, ahead of France and way ahead of Germany.

 
How Spain's supply network works
 

3. Spain’s supply network

 

The main features of Spain’s supply market are high concentration and effective specialisation. Retail trade represents more than 200 billion euros (15% of the GDP) and employs 2.5 million people, but most of the business is carried out by 5 main suppliers: Mercadona, Carrefoue, Eroski, Dia and Al campo.

Supermarkets, hypermarkets and discount shops represent more than 70% of spending by Spanish consumers, but department stores and specialised boutiques like El Corte Inglés are also very popular.

If you want to set up your business in Spain, you have several options:

Get in touch with a commercial broker or sales agent

The importers and distributors, established within the national territory play a major role at the heart of retail companies. Wholesalers on the contrary often only work regionally or locally.

Sales agents in Spain are fairly few (around 50,000) and, although this option is the cheapest you will need to plan for increased supervision and regular contact with the sales agent to ensure your activity in the Spanish market is reliably monitored.

Creating a business unit

This is the best way to enter the Spanish market, as well as reassuring consumers it demonstrates true involvement at a local level. You will need to carry out an in-depth market analysis, calling upon experts who will help you work out the best way to set up your business. Tip: creating a subsidiary is not very common practice as the administrative procedures involved are very complicated. Creating an S.A or S.L (Limited company or Limited Liability company) would be a better option when entering the Spanish market.

Setting up a franchise

This is the most popular option for companies who want to enter the Spanish market. The industry is undergoing perpetual growth, and most franchise networks are of Spanish origin (more than 82% at the end of 2015); the UK lies in 4th place for foreign chains creating franchises in Spain (13 franchises, making up 6% of foreign franchises).

The largest number of franchises are within the fashion, hotel and service industries.
 
E-commerce: a growth industry in Spain
 

4. E-commerce in Spain

 

E-commerce in a very promising industry in Spain. They are the industry leaders in Southern Europe with more than 18 billion euros of sales revenue in 2015. However, and very probably the reason e-commerce represents such a good opportunity for companies hoping to enter the Spanish market, this sector only contributes around 4% of retail trade.

Unsurprisingly, the fashion industry is the most popular in terms of e-commerce sales (34%), followed by electrical appliances (30%), books (19%) and then sport, leisure and cosmetics (16% each). Nonetheless it it the tourism and travel industry that represents the highest online sales revenue, as single transactions are clearly much higher than in the other industries.

Almost half the country purchased something online at least once in 2015, and the online sales forecast for Spain in 2017 is among the highest in Europe (+31% on average for all channels compared to +18% in the UK).
 
The particularities of the Spanish market

5. The particularities of Spanish culture

Spain is a country with a rich history: culture, gastronomy and architecture are all areas Spanish people are proud of and they represent the country excellently throughout the world. It should come as no surprise then, that Spain is the world’s 3rd most popular tourist destination after France and the United States!

In general business terms, Spanish people tend to attach great importance to product pricing. Returns policies, delivery costs and payment options on e-commerce sites will be deciding factors for would-be customers.

Of course we shouldn’t over generalise: Spain is a large country and there are very real, deep-rooted regional differences. The country is set up around 17 communities, each relatively autonomous in terms of legislation and taxes. Yet the greatest differences are those of language.What we usually call Spanish is in fact Castilian and is the official language, spoken in most communities. There are; however, 4 other languages with official status in certain communities:

  • Basque (in the Basque Country and part of Navarre,)
  • Catalan (in Catalonia, the Balearic Islands and in Valencia,)
  • Galician (in Galicia,)
  • Aranes (in the Val d’Aran).

Many variants, non-official languages and dialects are all spoken throughout Spain.

It is therefore crucial to pay close attention to the region you want to target in Spain, so that you can tailor your sales to a local audience. Although Castilian Spanish is the main official language throughout the country, people from Barcelona, for example, speak Catalan! This isn’t a dialect or variant of Castilian Spanish but a completely different language with its own grammatical rules, spellings, vocabulary and pronunciation.

The Spanish market is a very strategical target for companies wanting to expand internationally. Spain has, like any other nation, its own particularities and you should pay careful attention to the economic, political and cultural context if you want to export to, or enter the Spanish market.

Sources : Sud de France développementRetail Me Not – Statista – Wikipedia
http://cdn2.hubspot.net/hub/209596/file-327381624-pdf/Exporter_en_Espagne.pdf
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