Why Choose Cross-Border Strategies For Young Businesses in Tough Economic Times?

Claire Prance, Commercial Director for Warehousing, Distribution, and E-Fulfilment, at SEKO shares insights on expanding market share overseas to overcome domestic market challenges. 

Consumers are tightening their belts, posing a significant challenge for fast-growing businesses, says Claire Prance, Commercial Director at SEKO. Fuel prices are rising, and next year, many will see their fixed-rate mortgages come to an end. These factors will make it harder and more costly to retain and acquire customers.

“Even in these challenging economic times, businesses aim for profitability,” Claire says. “A common strategy is to focus on gaining market share initially and then shifting towards profitability. To achieve this customer experience is paramount. It involves having a good product at the right price and delivering excellent service.”

In this article, Claire explains why cross-border trade stands out as one of the best ways to mitigate domestic market difficulties.

What are cross-border strategies?

Cross-border strategies are approaches and tactics used by businesses and organisations to expand their operations, reach, or influence beyond their home country's borders. These strategies are typically employed when a company seeks to enter new international markets or conduct business activities in multiple countries. Successful cross-border strategies often require a careful planning, market research, and a deep understanding of local conditions and cultural differences. 

What are the benefits of cross-border strategies?

• Market diversification - Expanding internationally allows businesses to reduce their reliance on a single market.
• Increased revenue and growth - Access to new markets can lead to revenue growth, increased market share, and profitability  
• Economies of scale - Operating in multiple markets can lead to cost savings through increased procurement efficiencies, and distribution optimisation. 
• Competitive advantage - Entering new markets can provide a competitive edge by offering products or services not readily available to local competitors.
• Resource optimisation - Cross-border strategies can help businesses make better use of resources, including tech, expertise and intellectual property.
• Brand building - Expanding internationally can enhance brand recognition and reputation, both locally and globally. 
• Diversification of risk - Operating in multiple countries can mitigate risks associated with economic, political, or market-specific issues. 
• Global network and partnerships - International expansion can lead to valuable partnerships, collaborations, and networking opportunities. 
• Enhanced profit margins - Entering markets with favourable economic conditions or pricing structures can lead to a higher profit margin.
• Regulatory arbitrage - Businesses can benefit from differences in regulations, tax policies, or trade agreements between countries. 

New frontiers

Cross-border trade involves selling goods from a domestic country to another party abroad, whether between a retailer and consumer (B2C) or between businesses (B2B). According to McKinsey, only about 8% of total SMEs in the EU, less than half of online businesses, sell to other EU countries, but adds that it is essential for their prosperity.

“Cross-border trade is about finding and growing your market share in non-domestic markets,” Claire explains. “In the UK, we often target English-speaking or European markets due to cultural or geographical proximity, respectively. It's about gaining resilience against domestic economic forces by finding new customers in those markets and cross-border logistics companies and services facilitate selling and delivering products to these markets.”

Claire highlights that logistics providers like SEKO have a robust global network for eCommerce order facilitation. Products can be shipped either from your domestic warehouse or the space you pay for in the provider’s distribution centre. Choosing the right logistics provider is vital.

“If you're a medium-sized business with global ambitions, you're seeking a provider with both a global reach and a responsive approach, valuing your business as a significant client. Being lost among huge brands is a concern. It's about choosing a company eager to cater to you.”

Unlocking more markets, maximising returns

Cross-border trade negates the need to establish physical stores, find local distributors, or navigate some local tax complexities, all of which can be costly. It’s an effective way to maintain profit margins while minimising capital outlay.

Though not without challenges, cross-border trade may result in longer transit times for customers in remote regions. Here, Claire underscores the importance of managing customer expectations, providing effective communication, and offering comprehensive tracking, a streamlined returns process and transaction refunds.

“When you notice particular interest in a market, businesses can set up a regional stockholding. If your customers frequently shop from Germany or the USA, it’s an excellent way to dip your toe in the water and boost market share. One of my favourite examples is a business called Manscaped, which established a distribution centre with us in the UK to serve the EMEA region,” she explains. “They found success in both the UK and Europe. Recently, they opened a SEKO warehouse in Rotterdam, the Netherlands, to achieve quicker transit times for EU customers, enhanced service, and financial benefits.”

Preparing for the future

SMEs looking ahead need to prepare for forthcoming challenges. The European Commission predicts average growth for the 27-member Eurozone at 1% in 2024, although many anticipate a worse scenario as the effects of higher interest rates permeate the economy.

Claire advocates that cross-border eCommerce is a great way to mitigate these risks.

“Many young, fast-growing businesses that found their customers online, usually via marketing or social media like TikTok, have experienced substantial growth in recent years. However, upcoming economic challenges could potentially stall that growth. By finding international customers, you can maintain the momentum and position yourself strongly for more favourable economic conditions.”

For further insights on how SEKO can assist your business with cross-border strategies, reach out to a member of the team.