Retailers around the world are looking outside their national borders to secure long-term growth as strategies are built for the future, with Africa being a preferred destination due to an emerging middle class and urbanization opportunities. However, expanding in the global retail market requires more than just ambition and desire; it involves a methodical approach to market entry to facilitate multi-entrance. Retailers will need to investigate market variables, customer behaviours, and operational considerations to eliminate risk and contribute to the potential for success. In this methodical approach, error must be eliminated through clear market research interpretations and demographic analysis with competitive dynamics defined and understood so that clear market entry plans are well-considered.

Developing a well-researched market entry strategy will support retailers to make informed decisions of where, when, and how to open new store locations across different geographic regions. With a focus on Africa and other similar emerging regions, retailers should not ignore the potential opportunities that are available if they understand the methodical approach to their expansion plans. This article is intended to demonstrate how site selection, market penetration strategies, geographic expansion, and a well-known retail rollout plan contribute to sustainable retail expansion in new markets.

Blueprinting Market Entry

At the core of any global retail expansion is a good market entry strategy. The market entry strategy serves as the map design, guiding businesses through assessment of opportunities, setting the most effective way to enter a new market through franchising, joint ventures, wholly owned subsidiaries or other associated models. When retailers consider a new store location, having clarity on the right market entry strategy not only conforms with broader growth strategies, but mitigates risks factors, such as cultural inappropriateness or logistical weaknesses.

Retailers factoring market entry into African studies must be aware of each region’s preferences; understand logistical and infrastructure limitations; familiarize themselves with regulatory frameworks within each country, before committing to opening a store. Also, the site selection process should naturally fall into the market entry strategy, ensuring locations complement any larger decision to expand or diversify. Local research, competitive information and customer view can all help retailers assess a model for entry which matches their available resources and brand position, paving the way for a successful and effective expansion.

The Power of Smart Site Selection

Site selection constitutes one of the most important aspects of any retail growth strategy. Many retailers experience success or failure in the operation of their new store locations due to site selection. Foot traffic, operational performance, and brand exposure can be affected. Retailers leveraging a global growth strategy face choices to consider predictors of success for site selection such as, population density, quality of infrastructure, income level, and national or regional competitive landscape.

In the African market, for example, there are major metropolitan centers with established urban hubs like Nairobi or Lagos that provide consideration for enormous opportunity, yet further exploratory examination is necessary due to unique logistics challenges along with localized consumers.  When retailers develop a retail growth strategy, an objective sites selection framework should be included in a robust portfolio of demographic analysis combined with regional geographically managed expansion objectives. Retailers can utilize location intelligence tools and field research to facilitate their ability to understand the returns associated with a site’s immediate profitability and broader plans of growth scalability.

A data informed approach to site selection focused on regional tendencies and consumption patterns will inform retailers which of their target markets have the best placement opportunity for new store formats. Ultimately the objective of store placement is to optimize market share across multiple new store placements while facilitating sustainable growth in the market for the retailer.  

Strategies for Deep Market Penetration via Expansion

Geographic expansion is at the very core of successfully penetrating a foreign market. Through expansion, retailers establish physical and brand presence where they can serve the variety of different customer bases their stores serve in an area. Geographic expansion requires much more than just opening stores in new markets. It requires a plan for an expansion that considers the socio-economic and geo-cultural characteristics of each region.

In Africa, retailers who target urban centers, as well as secondary cities can enjoy a presence which is sustainable, as urban centers have limited economic growth capacity. By considering the existing infrastructure, purchasing power, and the competitive landscape in planning for market share acquisition, retailers can better position themselves by selecting good locations for entry. Retailers may also successfully penetrate these markets by offering either region specific brands, specific marketing campaigns, and community engagement initiatives.

Successful geographic expansion creates an opportunity for retailers to expand and deepen their understanding of customer needs, which drives innovation, and ultimately supports profitability for many years across multiple markets.

Using Demographics to Map Retail Growth

An effective retail rollout plan is essential as a foundation for a global expansion strategy. The retailer is expected to determine store opening sequences, identify resource allocation, and develop and execute marketing and operational activities at each of its geographies. An effective rollout plan will typically rely on demographic research, using comprehension of the target consumer segments, age cohort of the population, income profiles, and buying behavior.

When we speak about the diverse market in the context of Africa, demographic research is useful for finding potential retail clusters and underserved regions. Retailers would certainly need to offer unique rollout plans which are suitable for the local demand. This should be irrespective of whether it is a flagship store, express store or hybrid model. Moreover, the rollout plans should typically rely on a phased rollout of stores as pilot stores at the beginning of the rollout. This should be subsequently followed by additional stores based on the success of the pilot stores. A phased rollout provides the retailer with some level of flexibility to react and make adjustments to the rollout plan while taking into consideration limited resources.

Using demographic studies in balance of the broader retail growth strategy will ensure that selected locations for new stores complement the local consumer base. They should be able to drive footfall, consumer engagement, and lead to a sustainable revenue growth from the entry into the market.

Using Rival Insights to Shape Expansion Plans

It is vital that retailers understand the competitive landscape when developing an expansion roadmap that will be successful. It is important for retailers to analyze who their competitors are in their target markets, the relative market share that exists within these markets, competitors’ pricing, customer loyalty, operational models, etc. Having this market intelligence allows the retailer to determine how they can differentiate themselves in the market, not enter a market space that has already become saturated, as well as identifying potential gaps in the competition to identify where they can open stores, or develop an optimal area expansion strategy.

In African retail, competition can be quite different based on whether the store is located in an urban or rural area. What markets are dominated by local brands versus open to international players? Retailers can enter a market using the gaps left in the market by competitors and develop their market entry strategies and retail rollout plans accordingly. Competitive intelligence derived from the competitive analysis will be instrumental in decision-making related to marketing, pricing, and inventory, decisions which ultimately will be crucial to their long-term success.

At the end of the day, if an expansion roadmap leverages competitive intelligence to mitigate risks and improve strategic focus, then the retailers should be able to separate their market differentiators while concurrently building a scalable and sustainable retail expansion in new markets.