Marketplace Expansion: The Secrets to Success

HyperwalletDirector of Strategy and Business Development

Global expansion isn’t always easy – just ask Target.

To help kick off its expansion efforts into Canada, the retail giant took over the leases to 220 Zellers locations in 2011. About four years later, Target made a hasty retreat from the Great White North, shuttering its Canadian business almost overnight. Of course, this kind of expansion blunder (which cost the company roughly $7 billion) isn’t unique to Target. Other well-known companies – such as eBay and Best Buy – have faced their own struggles during forays abroad.

If you’re a marketplace looking to expand, how can you avoid a similar fate? Reduce the risk with data.

Far too often, businesses rely on ill-informed strategies that don’t provide the greatest shot at global success. The 2018 Marketplace Expansion Index can help fill that knowledge gap. Instead of basing international growth decisions solely on a country’s proximity or payment infrastructure, the Index leverages 10 key factors – including ease of doing business, the level of English proficiency, and retail e-commerce market size – to gauge the expansion-readiness of 36 different countries.

Each of the countries is divided into three tiers based on their attractiveness: established, emerging and evolving. But just because a country is in the “established” category doesn’t mean it’s a good fit for your business. Here’s a look at five emerging countries that may better align with your company’s unique strengths and weaknesses.

1. Belgium

Freelancing is far from a foreign concept in Belgium. In fact, about 30% of Belgians already do some sort of freelancing work in their spare time. The emergence of robust payment and logistics infrastructure will likely make it even easier for gig economy companies to scale locally.

For service-based platforms, however, things may get little tricky. Steep social security taxes coupled with the second-highest corporate tax rate in Europe may quickly stunt business growth. Minimize human support to free up resources where necessary.

2. Sweden

Sweden isn’t known for its size. With a population size of about 10 million people, Sweden ranks well behind other expansion destinations. But when it comes to payments, the Scandinavian nation more than makes up for its small-but-growing population. Given the country’s exceptional payments and logistics infrastructure, nearly 99% of the workforce receives their paychecks directly into a bank account.

Swedes have also fully embraced the sharing economy. Around a third of the population has participated in the sharing economy at one point or another. From furniture to kitchen appliances, there’s almost no limit to what Swedes are willing to rent.

3. Hong Kong

For goods-based marketplaces, Hong Kong is the place to be. More than 85% of transactions involve cross-border movement – the highest in any country.

Acceptance of the sharing economy, however, is a different story. Despite the fact that 82% of Hong Kong citizens have been consumers of sharing economy activities, heavy regulations continue to stunt the industry’s growth. In May 2017, more than 20 Uber drivers were arrested on the suspicion of illegally carrying passengers for hire and not having third-party insurance. Businesses aiming to enter Hong Kong’s sharing economy need to keep a close eye on changes within this protectionist regulatory environment.

4. Israel

Although political unrest has plagued Israel at times, the country remains a hotbed for sharing economy startups. From Gett to Juno, a number of Israeli-developed ride-sharing platforms have launched successful pilot projects. Since Israel’s customer base is especially receptive to new services and goods marketplaces, there’s plenty of opportunity for innovation. Only speak English? No problem. Israel boasts a large English-speaking population that spends more time online per capita than people living anywhere else. Businesses that cater to this increasingly digital consumer base can quickly move one step ahead of the competition.

5. Malaysia

Much like Israel, Malaysia has suffered the brunt of political turmoil in recent years. A scandal surrounding the 1Malaysia Development Berhad (1MDB) fund has caused the ringgit – Malaysia’s most prominent currency – to regularly fluctuate in value. Still, though, emerging digital platforms would be wise to consider expansion into Malaysia.

With a growing unemployment rate, Malaysian workers are more eager to pick up digital work than ever before. And by 2020, digital economy activities could contribute toward nearly one-fifth of Malaysia’s domestic productivity. Don’t miss your chance to take advantage of this burgeoning digital economy.

Conclusion

Make no mistake – marketplace expansion is a significant undertaking. But if done right, it can help your company reach new heights. From surveying local competition to gauging e-commerce activity, give your business the best chance at expansion success by keeping strategic marketplace factors in mind.

Simran Singh

HyperwalletDirector of Strategy and Business Development

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