Growth across borders – the five best countries to expand to now

A new era of digital has become a new reality for most businesses – and often also customers with stronger budget restrictions. A logical consequence is to look out for new markets on the globe. But uncertainty prevails: Where does it make sense to invest now? Which markets are on the fast lane to recovery, which have proven most resilient? Where can you expect a demand for your products and services that (soon) will come with the necessary purchasing power?

For the best answers to these questions, we look at factors such as the GDP growth expected for 2021, the purchasing power parity (PPP) per capita, the potential of the market, business-friendly policies, stability and resilience. The result? Here it comes – our recommendation for the top 5 countries you want to expand to!

5. Australia

Australia has a population of less than 26 million people – but with a PPP of 57.21 thousand USD, it's a highly attractive market some still tend to overlook, leaving an even bigger share for China. But this may be about to change, with trade tensions between the two "neighbours" on the rise. Seeing Australia's current path to quick recovery after the pandemic, it becomes even more evident what the Australian market has to offer.

The country is renowned for its trade freedom and openness to business. Australian consumers are familiar with European and American products just as they are with Chinese. They purchase them on a daily basis, with a high demand for quality products – and with scrutiny of the price-performance analysis. As in most countries, price has become an even more decisive factor under the pandemic influence, as consumer confidence has declined. Nevertheless, recent numbers from early 2021 suggest that consumption may reach pre-pandemic levels by mid-2021, with pent-up demand and savings accumulated during the pandemic. The IMF expects a 3% GDP growth in 2021 – which may even be surpassed, as in early 2021 the unemployment rate has already dropped more than expected, for the fourth consecutive month: from 6.6% in December 2020 to 6.4% in January 2021.

Luxury goods are a growing sector in Australia, and so are health and personal care, as well as cyber security. As private savings reached record highs in 2020, leading not only to thriving bricolage and home decoration, but also to prospering real estate businesses, many families started nest-building activities that will ensure high demands in all related segments, even in the future. A pent-up demand can be expected for any goods and services related to outdoor activities, taking into account Australia's current optimistic post-pandemic outlook for the year and its strong traditional outdoor culture.

4. France

France has suffered no less than other strong economies, but it presents a strong strategy for a relatively quick recovery. The IMF expects a 6% growth in 2021 after the pandemic backlash – as opposed to the medium of 2.9% it expects for other advanced economies (and 4,2% worldwide); it responded strongly, fast and in a flexible manner to the crisis, with the backbone of a resilient banking sector and tax cuts which will ease business. The disposable incomes per household didn’t suffer much, due to the strong job retention schemes the government swiftly applied.

What makes France stand out is the focus on green and digital transformation among the recovery measures, besides progressive employment support. This fosters a positive outlook on more confident spending behavior and puts France into the spotlight for digitally advanced organizations and any forward-thinking, green technology business.

In combination with France’s strategic central position in Europe, a GDP that translates to 3.2 trillion USD, with a 44.77 thousand $ PPP wealthy and highly skilled population of almost 67 million people, in a rock-solid democracy, the French market cannot be overlooked and is a strategic cornerstone for international growth – and even more so as we’re in the Post-Brexit era.

3. China

China is the one big economy that even in 2020 managed to grow, as a result of the country’s fast and strict intervention on the pandemic that originated there. The world’s 2^nd biggest GDP (more than 16 trillion USD) makes a huge market to untap, with a population of more than 1,4 billion people – especially with a very optimistic IMF forecast of 8.2% GDP growth in 2021.

The Chinese market surely does present several challenges for international organizations, with a policy that still rather excludes foreign vendors than inviting them; nevertheless, there are defined gateways to deal with it, in the form of local partners and cross-border platforms. And the extraordinary dimensions of this marketplace are worth the efforts.

There are more challenges to deal with, language and cultural differences being the most obvious. But some less apparent may actually turn out to be at least as significant, to ensure a considerable piece of the huge pie China holds: Ecommerce has evolved to a completely different level here, with tools and platforms that differ tremendously from those being used in the Western hemisphere, calling for completely different strategies for success. Prosperity in China is only possible with deep insider knowledge. The good news here: This knowledge is available for you. If you choose your partners wisely, you'll not only open up new dimensions of business – but you’ll become familiar with the future possibilities of ecommerce, even years before other market players know it. Don't hesitate to reach out to us for help.

2. Japan

Japan is the world's 3^rd biggest economy, with a GDP of 5.1 trillion USD – and its recovery in the last quarter of 2020 surprised nationally and internationally. It shows the general robustness of the country, even though 2021 started with a backlash again, as a logical byproduct of new preventive measures, after new virus surges. Nevertheless, the IMF expects for 2021 a 2.3% growth of the Japanse economy.

A main reason for Japan's robustness is its low unemployment rate, which even during the pandemic and related shutdowns didn't rise over 3.3%. In a wealthy and highly skilled population of 127.76 million people, with a PPP of 40.73 thousand $, this means a stable market not to be ignored. The population is highly educated and technically skilled, making it an interesting, but highly competitive market for advanced technology solutions. The Best Country Report even perceives Japan as the country with most technological expertise – and as the most innovative country worldwide.

Japanese consumers are open to international brands in general, and especially to products from countries that are renowned for certain branches, such as Swiss watches. High quality and international reputation make for a bigger market share in Japan than in any other country of the world; brands such as Louis Vuitton are said to make up to 50% of their global profit in Japan alone, as the Santander bank states. Nevertheless, one of the pandemic after-effects is a shock in brand loyalty: In a representative McKinsey survey from November 2020, 32% of the consumers reported to have changed stores, brands – and the way they shop. This uncloses opportunities for new market entries, even more so as more Japanese opened up for online shopping and intend to continue doing so after the pandemic.

1. Germany / DACH region

Who wants to open up one country when you can get three, almost for the price of one? Even more so if two of the three countries have a very high PPP – and one an extremely high … Welcome to the DACH region, comprised of Germany, Austria and the German speaking part of Switzerland. Numbers first: In Germany, more than 83 million people have a PPP of 51.97 thousand USD; add roughly 9 million inhabitants in Austria, with an even higher PPP of 54.28 thousand USD. Finally, Switzerland's population nears 9 million. Their PPP? 90,36 thousand USD! And more than 62% of them consider German their first language.

Germany is not only Europe's leading economy, but also showed an exceptionally resilient economic response to the pandemic. The German crisis respond tool Kurzarbeit has become the gold standard for similar measures in other countries: Short-time work benefits, encouraging employers not to lay-off their employees but just reduce their weekly working hours.  This was one factor that contributed to the economy's quick 8,2% rebound in the third quarter of 2020, after the record contraction of 9,8% in the second quarter – giving hope for the new recovery path after the following waves, as vaccination meanwhile has started. Thus, the IMF expects Germany's GDP to grow by 6% in 2021; for Austria, the IMF expects 4,6% growth, and for Switzerland 3,6%.

The DACH region's wealthy and highly educated consumers are as strong and attractive as they're demanding. Practically all of them, but even more so German consumers, have a strong tendency to demand great value for money – and to do extensive research before a final purchase. Although the pandemic inevitably shifted the buying behaviour, DACH consumers still often prefer the web rather as a source for pre-sale information, appreciating the amenities of physical shops for the actual purchase.

This is the result of a common, strongly prevailing trait the DACH region countries share: Security and trustworthiness are core values here, and you have to prove them in every aspect of your business to be successful. Think of payment options, for instance: An invoice option is almost a must here, providing more of the safety these consumers demand. Credit card and digital wallet options such as Paypal are on the rise, but you'll still miss out on a big share of customers if you don't give them the invoice option. Even its sheer existence already helps to build trust.

Of all three markets, Germans are most loyal to their preferred brands; if product and service are of high quality, 60% of the clients are willing to do further purchases from the same brand, the Santander bank reports. All DACH inhabitants are frequent buyers of foreign products, although environmental, quality and sometimes even sociological and political concerns sometimes do lead to preference for local, national or European products. In any case, full transparency about the origin of a product is important. In general, this is a region par excellence for eco-friendly, organic and vegan products, and such produced by a green economy. As long as the benefits justify it, the consumers are willing and able to pay the higher prices that come with it.

The pandemic didn't change the fact that online purchases, especially when it comes to clothes and electronics, are still largely associated with an opportunity to take advantage of discounts. However, the online presence does play an important role even for brick-and-mortar stores, even in post-pandemic times. While there's a pent-up demand for physical and haptic shopping experiences among DACH consumers, they now integrate online channels into their customer journey, expanding their demanding expectations to the online services (including after sales). Noteworthy in this context: Mobile use is on the rise even among DACH consumers, but aligned with their profound research patterns, many of them still prefer the computer when doing ecommerce.

As you can see, you should know the markets you want to approach from the inside – we're here to help!