International expansion is an essential step in any brand’s journey toward global growth and recognition. When executed correctly, it can unlock incredible opportunities, however, if mismanaged, it can become an endeavour that is both time-consuming and prohibitively costly, draining resources and potentially harming the brand's reputation.
By entering international markets, businesses can tap into new markets and consumer segments, leverage economies of scale, and reduce dependency on a single market, thereby fortifying their long-term stability and growth. However, international expansion is not without its challenges. Companies must navigate cultural barriers, logistical complexities, and unfamiliar regulatory and business environments. These challenges can vary significantly from one region to another, requiring a deep understanding of local market dynamics, consumer behaviours, and legal requirements.
The key to a successful international expansion lies in aligning the immense opportunities it offers with the scale and scope of your expansion efforts. This alignment ensures that the time, effort, and financial investment put into this significant endeavour are not only justified but also lead to a successful and sustainable global presence. Careful planning, thorough research, and strategic execution are crucial in making certain that international expansion efforts are worthwhile and pave the way for long-term success.
A Physical Presence
In today’s retail environment, online brands are already operating around the globe, but at Agile Retail we focus on the far more impactful power of physical retail. So why is a physical store essential when expanding internationally?
Creating a physical presence in a new market allows customers to experience the brand firsthand, which can significantly enhance their perception of its authenticity and quality. In new markets, where brand recognition may be low, a physical presence can serve as a tangible expression of commitment to that market, reassuring customers that the brand is here to stay.
When operating in a new territory, having a physical store can also serve as a hub for omnichannel strategies, allowing for seamless interactions between online and offline shopping experiences. Customers can browse online and then visit the store to pick up or try out products, return items, or seek in-person assistance, enhancing overall convenience and customer satisfaction. The store can also serve as a logistical hub for this new geography, lowering shipping costs to the region.
In highly competitive markets, having a physical presence can even be a key factor in standing out. It allows a brand to compete directly with local players and global competitors who may already have a foothold in the market. Physical stores also provide valuable opportunities to gather real-time insights into customer behaviour, preferences, and trends. By observing how customers interact with products, brands can tailor their offerings and marketing strategies more effectively.
In light of the importance of leading with a physical store, there are three core options for international expansion: concessions, pop-ups, and flagship stores. But which one is right for you?
Concession Stores
A concession store is a stall, display, or shop within a larger department store or retail space. This is an extremely popular first step into a new territory for many brands.
The reason for this popularity is largely a consequence of the lower initial investment required. As part of a larger retail space, there is an established customer base as well as a recognised brand acting as an umbrella. These factors come together to create an opportunity that has a reduced risk for brands entering the space.
This reduced risk does, of course, come with consequences. Brands have limited control over the retail environment, and they are subject to the host store's foot traffic, even within their own space. This can result in brand dilution.
This option is best suited for brands in the early testing phase for a new market or those looking for lower-risk entry points. It’s a great chance to judge your brand's standing in new markets, but this information can be diluted by the reliance on the department store umbrella. Perhaps the right move is something equally as agile, but more singular, like a pop-up shop?
Pop-Up Stores
Pop-up stores are temporary retail spaces used for brand activations or market testing. These standalone spaces are an excellent way to translate an existing retail archetype into a new location.
Pop-up stores are flexible and relatively low-cost. Naturally, they require some investment, but given the short timeframe, this investment does not need to be astronomical. The true strength of a pop-up is its ability to create buzz and urgency around the brand. By limiting the time that consumers can access a new and exciting retail location, consumers are more likely to commit to entering the space and exploring the brand before it disappears.
The temporary nature of this venture can be a double-edged sword. On one hand, the short-term storefront can leave consumers eager to see more of the brand, resulting in them exploring and purchasing products online. On the other hand, brand awareness can dwindle rapidly once the store has run its course. Temporary stores can also cause logistical challenges as infrastructure is not set up to handle stock and setting this infrastructure up will be a heavily sunk cost once the store closes.
When considering a pop-up activation, it will likely be a good fit for brands wanting to generate hype and interest, test new markets, or launch new products without a long-term commitment. But if you are confident in your brand's ability to thrive in a new geography, why not commit to a full-scale permanent store?
Full Stores
A dedicated, permanent retail space owned and operated by a brand is the highest level of commitment to a new market.
Operating your own store has huge advantages. Brands have full control over the location, design, and build from the very inception, allowing for the creation of an experience that fully reflects the brand while still integrating with the new geography. This more singular approach can build deeper customer relationships as consumers interact directly with your brand and can continue to do so over time, another benefit of a long-term presence.
This considerable undertaking comes with high upfront costs, higher operational complexity, and greater risk if the market entry is unsuccessful. The commitment is obviously large, as is the cost, so in the case of a fully-fledged store in a new region, it is all the more important to find a local partner to assist with market entry and operational intricacies.
Opening a new store in a new country is a huge milestone. It suits established brands with a strong market entry strategy and sufficient resources, or brands who have connections to local partners who can help with cultural, regulatory, and logistical solutions.
What’s Right for You?
The first step in deciding which approach is right for you is to evaluate your brand’s needs. It is essential to assess your brand’s goals, resources, and market strategy when deciding on the type of physical presence to create when expanding internationally. This internal consideration is an enlightening process.
A highly influential factor is the maturity of the market that you are considering entering. Different strategies may work better depending on whether you are entering a mature or emerging market. The same evaluation should be made for your brand’s maturity. Established brands might lean towards full stores, especially if they already run some of their own store footprint at home. Alternatively, newer brands may start with concessions or pop-ups to increase brand awareness.
Financial and operational considerations are equally important. Consider your budget, operational capacity, and risk tolerance when choosing between concession, pop-up, and full stores. It is also worth considering how each option aligns with your long-term goals for market presence and scalability. These factors come together to give a far clearer picture of which option suits your brand best.
Conclusion
International expansion is a pivotal milestone for brands seeking global growth, but it requires a strategic approach to balance opportunities with risks. A physical presence in new markets plays a crucial role in establishing credibility, enhancing customer experiences, and integrating omnichannel strategies. Brands have several options—concession stores, pop-up shops, and full stores—each offering different levels of investment, control, and risk.
The key to success lies in carefully evaluating your brand's goals, resources, and market maturity to select the most suitable approach. With thoughtful planning and execution, international expansion can unlock sustainable growth and long-term success.
If you and your brand are looking to enter new geographies and expand beyond your borders, Agile Retail can help facilitate that expansion. Get in touch at hello@agileretail.co.uk.