On its face, the pandemic-era mantra for small and medium-sized businesses (SMBs) is a simple one: adapt, adapt, adapt.
Over the past year, SMBs have been forced to rapidly shift their operations in order to survive. Those that decided to make the switch to digital found that the pivot brought them global opportunities. In a recent OFX survey of U.S. small businesses, data shows that the ones making a comeback are doing so better, faster and stronger than ever before. According to that data, 92% of SMB owners saw their businesses expand during the pandemic. What’s more, of the 40% that entered a new market for the first time, 98% agreed that expanding internationally increased their overall revenue in 2020. In fact, companies that entered into a new international market for the first time during the pandemic were 30% more likely to say that they exceeded 2020 revenue targets.
But expanding overseas can get overwhelming. Following are three tips for both retailers that have already made the jump, and those looking to grab a piece of this massive, once-in-a-lifetime opportunity.
Embrace the e-commerce boom. Last March, many retailers moved their sales online as a means of survival. Now, one year later, many are reaping the benefits of the e-commerce boom. But just how successful was that pivot? Of the SMBs surveyed, 41% agreed that moving to e-commerce enabled them to increase sales during the pandemic; 56% reported their business exceeded their 2020 revenue targets, and another 36% said they came out right on target.
Making the pivot to reach new markets could mean expanding into Europe or Australia through existing marketplaces like Amazon.com, or even secondary marketplaces that already hold a strong presence in their local market, such as Allegro in Poland or CDiscount in France. The opportunity to secure market share is still ripe, and international marketplaces are having a bigger impact as global e-commerce continues to grow. Once selling channels are identified, businesses must prioritize supply chain diversification, which includes utilizing local fulfillment centers for each market. This streamlines shipping operations and decreases overall shipping and fulfillment costs, even amid crises like the pandemic and the recent upset in the Suez Canal.
Leverage modern financial solutions. Flexible payment options have become a necessity for online retailers. This includes offering pricing and payment processing in local currencies. Traditionally, businesses have had two options: open a bank account in each country, or utilize default marketplace solutions in order to transfer foreign currencies into U.S. bank accounts. However, both options often result in extra fees that can go unnoticed. Now, though, financial technology companies have a solution. Many offer services that allow SMBs to accept local currencies, keep their money in a virtual multi-currency account, and automatically complete transfers with low fees and when exchange rates are optimal.
Furthermore, with a global currency account, SMBs can easily pay vendors, suppliers and local taxes from local currency balances, rather than shuffling money back and forth and accruing even more fees. These digital payment solutions don’t just save SMBs money; they can also improve their customers’ experience, as well as their partnerships with the suppliers and manufacturers within each individual market.
Entering a new market comes with challenges, from manufacturing all the way down the supply chain. That said, small and medium-sized businesses have a unique opportunity to get ahead of larger retailers before modernized technologies level the playing field. While operating in foreign markets and regularly exchanging currency can be intimidating, it can be a make-or-break deciding factor when considering whether to expand.
Find a currency expert you trust. That said, of the SMBs surveyed, 86% of those who have expanded internationally said it was more difficult than they anticipated. Specifically, 60% said their main barrier was a lack of knowledge about foreign currency exchange to begin with, and 46% had concerns related to invoicing and receiving payments in foreign currencies.
But one in five small businesses say that information on ways to structure payments would help them. Integrating currency exchange into your international business strategy doesn’t have to be hard. Modernized fintech companies can enable fast money movement between currencies at low costs. Designated currency experts help remove some of those barriers, and ensure a track to success by helping to navigate markets and currency fluctuations. SMBs may be worried about the volatility of the markets, but with the right strategy in place, there’s an opportunity to capitalize on optimal exchange rates, manage cash flow, and save big — whether it be paying the supplier, or accepting funds from customers in different currencies.
Traditionally, when we think about a small business, we picture a strictly local, brick-and-mortar, 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 their operations both domestically and internationally at a low cost. These businesses are now efficiently utilizing these resources, and they’re embracing big opportunities at home and abroad. This year, we’ll likely see continued e-commerce acceleration around the world. SMBs that can adapt and take the necessary steps to expand and modernize will be best positioned to win as the pandemic draws to a close.
David Nicholls is director of enterprise development and e-commerce at OFX.