Expansion is a sign of success in any industry. However, as your business expands, you will find that it comes with its own unique set of challenges. Moving from a national business to an international business is a particularly difficult step, yet the rewards can be just as significant. These challenges and rewards are equally enhanced when considering expansion from the APAC region.
At TradeGecko, we understand the typical challenges facing APAC businesses so we’ve compiled the following information to help guide you.
Why APAC companies are expanding
The APAC community presents several opportunities to local businesses. There are many possibilities for growth within the region, and obvious geographical advantages to expanding into nearby, rather than distant, markets.
However, as EY explains, the “best growth opportunities come from outside Asia.” They go on to explain that “Western Europe offers cheap assets and open economies”, meaning that, for APAC countries, “Europe may be the opportunity of a lifetime.”
According to EY, Australian companies are, on the whole, developing more slowly than Asian ones. However, this does not mean that individual Australasian companies can’t benefit from the same trends and strategies as their Asian counterparts.
Rhys Furner, Head of Partnerships and BD in APAC for Shopify mentions that:
Since APAC businesses need to expand sooner, they may have less experienced management teams in place. However, this means that they have youthful energy and enthusiasm to move from.
APAC businesses also have easy access to other markets in the area, and a great deal of insight into smaller markets such as their own. This can make international expansion easier, and allow it to flow more naturally out of the organic growth of your company.
In another article, EY lists the main advantages to international expansion for APAC businesses:
- Routes to market
- Access to resources
- Access to skills
- Access to technology
While these are all definite advantages, expanding into countries such as the US and the UK presents specific challenges. It is important for companies based in APAC countries to be aware of and prepared for these challenges.
Things to consider when expanding
Expanding into another country is not something to be done lightly. Even more so than with international travel, international expansion presents both dangers and opportunities. There are a number of factors that you absolutely need to consider before you begin.
Does a customer base exist in the country you want to expand into?
First of all, you need to make sure that there is a market for your business in your target country. This may seem obvious, but you’d be surprised how many companies try to push their products and services where there is no market.
Shopify suggests some good metrics you can use to identify potential growth markets:
- Where large numbers of your customers buy from.
- Where you get a lot of inquiries from (“Do you ship to country X?”).
- Your abandoned cart reports and Google Analytics to see which markets are underserved or frequently abandon their purchases.
So, for example, if you are getting a lot of orders or enquires from the UK, it makes sense to consider expanding there. If, however, you have never had so much as an abandoned cart from a British user, maybe there isn’t a demand for what you have to offer in the UK.
Jojo Maman Bebe is a good example of a company that has expanded to meet existing demands, both domestically and internationally. The company excels at handling its own growth effectively, and “has an exceptionally high rate of 20% growth, opening at least 6 new stores a year while expanding into new international markets.”
Of course, this doesn’t mean that you should only expand into countries where there is already a huge demand for your specific products. After all, since your web presence should be geared towards countries you already operate in, chances are that a lot of people in potential target markets have no idea that you, or your products, exist.
It is absolutely essential that you conduct at least some basic research. Whether you’re identifying a niche in the market or recognising a specific demand for your products, you should be able to explain, to yourself if no-one else, why you think expanding into a given country is good idea.
Is the foreign market compatible with yours?
It can be tempting to assume that what works in Australia, China, or Singapore will work in the US, the UK, or Europe. However, sometimes something as simple as the differences in time zones can complicate matters.
There are also a number of other marketplace factors to consider, including local currency, cultural differences, and differing rates of supply and demand. You must also be aware that local companies may already have a majority market share in your target country. Competition can be a good indicator of potential opportunity, but it’s important that you understand how you will position your business and carve out your own market share.
Extensive market research should be carried out before any steps are taken. You should ensure that you do everything you can to ensure you are stepping into a marketplace that matches with your products and services.
Will you be looking to take market share from incumbent competitors? Will your arrival in the market support the growth of the overall market size?
Do you have the necessary staff and resources?
No matter which country you’re expanding into, you need certain resources to succeed. eCommerce resources such as Shopify can make it easier to reduce some of the costs involved in international expansion, but even the most cost efficient solution will still involve additional costs to your business.
TradeGecko inventory and order management software can help you manage your shipping, stock, and logistics in the country you’re expanding into. This can significantly offset the cost of expansion, both financially and in terms of time and effort for your staff.
However, there is always going to be an expenditure of resources. You might not need to rent a warehouse and hire a full team of staff on location in your new country, but you will certainly need to approximate your costs in some way.
To successfully expand into a new marketplace, you’ll need to consider several technical aspects around your website and online store. The initial choice is usually between deciding on either a) a separate domain or b) using a subdomain of your existing website. E.g. yourstore.com and uk.yourstore.com and so on. In either choice, you’ll need to create a plan for translating and localising your content to assist with Search Engine Optimization.
There are a lot of hurdles to overcome if you want to expand your business internationally. Look out for our next article where we outline how to overcome the top 5 challenges of international expansion to make the transition process a much easier experience for you.