Sunday, November 8, 2009

Should a Spanish business aim at the Spanish market?

Sounds like a bit of an Irish question but from the point of view of expat businesses in Spain it is a very pertinent one. Say you are British and decide to set up a business in Spain; however well you think you know Spain, the language, culture and commercial environment, you are sure to be more comfortable dealing with British and other "Northern European" customers. On the other hand maybe you have a product or service that is new to Spain or at least your part of it, or perhaps you have spotted an area that is very badly served, overpriced and uncompetitive for Spaniards and foreigners alike. In this case you'd be a fool to pass up the largest part of the market wouldn't you? So the short answer to the question is probably "depends on your business - if it looks like there is a good opportunity to market to the locals as well as your compatriots then go for it". But I would just like to point out three pitfalls from my own experience:

Beware of the "impressing the natives" trap

There remains a tendency among foreigners in Spain to view the country as slightly backward and behind the times when it comes to new technology, products and ways of doing things. You may think the absence of something that has already taken off in the UK means introducing it in Spain will guarantee success. You may be right but bear in mind that we live in a global village and if something works in one country it tends to spread to others quite quickly. So perhaps your revolutionary product or service is in Spain already but you just haven't seen it perhaps because it is distributed in a different way. Or worse it has been tried in Spain already but failed for some cultural or legal reason you haven't fathomed.

Case Study: I spoke to a client recently who was convinced that he was going to make a killing setting up a type of consumer website that is very profitable in other countries (I can't be too specific). He was convinced that he could introduce it to Spain and make a killing. I asked if there was any competition and he said no. I found it hard to believe as I had heard of the fortunes being made in this area and was sure someone would have tried it in Spain. Sure enough, when I next got online, it took me about 20 seconds to find several established sites covering exactly the market he was going for.

Don't try and second-guess the Spanish mentality

A little knowledge is a dangerous thing and in this area it is particularly true. Someone without any pretence of knowing the Spanish language or customs would certainly shy clear of aiming their new product or service at the locals but someone who has some knowledge may think they know enough to base a business around Spanish trade. But you can never really think like a local even after long term Spanish residency and understand their thinking and you should be wary of thinking you can.

Case Study: a British couple in a very rural inland Spanish town decided to open a smart, continental-style cafe because the town's existing cafes were all fairly dingy and staid. They spent a lot of money on the cafe's interior, offered fresh cakes and sandwiches, a variety of speciality teas and coffees and were indisputably the smartest cafe in town. Unfortunately the project foundered not because the Spanish weren't happy to give it a try but because of three factors:

- the continental cafe's premium product needed to sell at a premium price which just wasn't accepted by the majority of price-conscious locals
- the owners never really adapted their menu sufficiently to local tastes. Yes their double mochachino espresso and lemon drizzle cake would go down well in a Soho Starbucks but here tostada and con leche will do fine for breakfast. They had to offer the locals what they were accustomed to and thus lost their uniqueness and premium pricing justification.
-the loyalty of Spanish customers to cafes that were plainly inferior because that's where they always went

CONCLUSION: obviously you can't overlook the local market particularly if there are some simple, easy steps you can take to attract the extra business (e.g. bilingual price lists, additional opening hours) but don't try and starting a business in Spain that relies too heavily on wowing the locals.

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