Ready for a regional DC? Read this first...
Distribution center inflection points
I recently joined a panel discussion hosted by Vervaunt at their Pulse Breakfast event, where we dove into internationalisation and new market expansion. We spoke alongside the team at Vervaunt and Airwallex, before listening to an engaging panel from D. Louise, Strathberry and Women’s Best.
One topic kept surfacing throughout the conversation: when's the right time to establish a regional distribution centre? Clearly, it’s a challenge many fast-growing brands are wrestling with, so here's my take on how to make that crucial call.
Taking your brand global isn't as simple as flicking a switch and hoping for the best. Too many brands have learned the hard way that international success depends heavily on strategic operational decisions, especially when it comes to logistics and distribution.
Setting up a regional Distribution Centre (DC) is a significant step. Done right, it can dramatically improve your operational efficiency and customer satisfaction. But how do you know if, and when, you're ready?
“Please, don’t just switch on apps and expect everything else to work itself out… Take the leap, aim higher, but don’t f**k it up by underestimating what’s involved.”
The Right Moment to Move
International growth often reveals logistical limits. Recognising when to transition to regional DCs comes down to clear financial reasoning rather than intuition or ambition alone.
Tariff and Duty Costs: Geopolitical shifts can suddenly spike costs. Brexit led many UK brands to face unexpected tariffs. Similarly, potential new tariffs from the US could significantly increase import costs for overseas businesses. Brands can end up spending up to 30% more on duties compared to local alternatives, making a regional DC not just beneficial, but essential.
Operational Responsiveness: International DCs can significantly speed up delivery, improve customer satisfaction, and directly enhance your brand’s market competitiveness.
Doing Your Homework: Financial Readiness
Before moving forward, ensure you're financially prepared by developing a comprehensive financial model that accounts for setup costs, staffing, and ongoing operational expenses. It’s crucial to have your numbers pressure-tested by experts who can critically assess your assumptions, including tariff risks, transfer pricing, and technology investments.
Skipping this stage risks overlooking critical costs that can undermine your expansion strategy.
Making It Happen: Steps to Success
Once you've confirmed regional distribution makes sense, here's your playbook:
Start Small and Validate: Test your market assumptions before large-scale inventory investments. What sells domestically isn't guaranteed to perform abroad.
Market-by-Market Strategy: Avoid replicating strategies from your home market. Run market-specific tests, as consumer behaviour and logistics vary significantly by region.
Localise for Real Impact: Understand and match local payment methods, delivery expectations, and return policies to build genuine customer relationships.
Continuous Optimisation is Key
The work doesn't stop once your DC is operational. Continuous optimisation ensures sustained success:
Regularly review market performance and adjust your strategy.
Use local customer feedback to refine your approach.
Stay agile; market conditions can change quickly, and your approach must adapt.
The Bottom Line
Expanding globally holds tremendous opportunity, but comes with substantial complexity. Brands who proactively plan, conduct detailed financial assessments, and embrace continuous improvement are the ones who successfully scale internationally.