The shift from brick-and-mortar to online retail has become a clear trend as small and medium-sized businesses (SMBs) pivot to keep up with rapidly changing regulations and consumer needs due to the COVID-19 pandemic. And, according to a new study from OFX of over 600 small businesses, SMBs aren’t stopping at simply shifting to online operations. Globalization broadens growth opportunities and opens new revenue streams — and North American small business owners are embracing new markets. In fact, 50 percent of SMBs say they're looking to expand internationally.
By offering a product in a new market before competitors, merchants have the ability to massively expand their customer base and build brand loyalty among consumers that may not have had access to certain products otherwise. Different countries can offer large, untapped markets, be less competitive, and allow for wider margins. However, launching internationally can be intimidating for first-timers. Here are three things to keep in mind for long-term success:
Identify Ideal Markets
When considering which markets are ideal for initial expansion, SMBs should first test in markets that are closest in proximity to its origin market. For example, if a business is having success selling in the U.S., Canada is a great first step in expanding internationally. From there, the U.K. might be an ideal market as it has the same primary language, a lot of the same rules and regulations, and similar consumer demand. Once this is determined, it’s imperative for businesses to ensure there's access to local fulfillment centers for each market. This can dramatically streamline operations and decrease overall shipping costs, even amid demand swings sellers in many countries recently experienced during the outbreak of the pandemic.
Simplify Your Software Stack
SMBs' tech stacks should always include three buckets: sales and marketplace management software, logistics and inventory management software, and digital payments software. Across the board, SMBs must ensure that each solution both has integration capabilities and supports all platforms they sell on. For example, if a sales tool, marketplace management tool, and shipping tool each supports the other, it will not only streamline market research, but also ensure inventory accuracy. Lastly, when selling internationally, businesses must adopt software that enables them to localize — from multilanguage translation to accepting different currencies. Planning for what’s needed in order to be locally relevant in multiple markets is complex, but it’s make-or-break for long-term success.
Consider Local Currencies
Selling overseas requires pricing and payment processing in local currencies. Traditionally, businesses would have to either open bank accounts in each country or rely on default marketplace solutions to transfer foreign currencies into U.S. bank accounts. However, both are associated with very hefty fees that often go under the radar. Fintech companies now offer services that reduce this complexity by allowing SMBs to accept local currencies, hold it in a virtual multicurrency account, and automatically complete the transfer with low fees and when exchange rates are optimal. This can save businesses significant money on unnecessary payment fees and high exchange rates in the long run. Additionally, with a global currency account, SMBs can easily pay vendors, suppliers and local taxes from local currency balances generated in the country they’re selling in. Not only do modern, digital payment solutions significantly decrease costs for businesses operating overseas, they also improve the customer experience for each individual market.
Traditionally, when we would think about a small business we would picture a strictly local mom-and-pop shop, but that’s not the case anymore. Small businesses now have access to enterprise-grade technology that allows them to scale operations at a low cost. Ultimately, these businesses are efficiently leveraging these resources and embracing big opportunities — which could be a big contributor to SMB recovery in the U.S.
David Nicholls is the global head of e-commerce at OFX, an online foreign exchange and payments company.