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Retail: How to expand internationally

Expanding into new markets is an important decision, whether you're doing it for the first time or looking to expand your existing network.

Not only do you need to consider what's right for your business and what’s going to help you achieve your business strategy, you need to understand which markets offer the best potential and decide how you're going to do it. 

Just because you rely on ecommerce at home doesn't mean that this is the only route to market abroad. Franchising can also be a good option even if you don't operate on this basis in the UK. What works for one company might not be right for another. 

Expanding overseas and entering a new market can also have a significant impact on your operations at home. It's easy to underestimate the amount of work involved. Trying to move too quickly can be bad for business – existing and new. 

Is international expansion right for my business?

Before taking the plunge, retailers should consider how this supports their business strategy and consider whether they have what it takes to succeed. That will mean a good enough understanding of the risks and opportunities; a clear market opportunity; the right skills and the necessary funds. 

When eyeing up potential markets, retailers should look at the demand for their products, population trends, wealth and spending and any unusual restrictions that might impact on the cost or ease of doing business, as well as any supply chain issues. 

What are the different routes to market?

In our latest Retail Growth Strategies Report, almost half (42%) of UK retailers said they planned to merge with or acquire another business to enter a new geographic area. This fits with the findings of our M&A Market Monitor, which showed an increase in deal numbers and the average deal value and an increase in deals involving overseas parties, but with some further tightening of deal terms. 

Franchising is also an increasingly popular choice, even if the business does not use this model in the UK. The benefits include financial investment by the franchisee, but some retailers are unwilling to relinquish that much control, opting instead for a hybrid model or using a license with less restrictions. 

Entering into a joint venture with a local partner often brings something to the table, especially in very different markets to the UK. 

Another important question is whether to launch an online shop or bricks and mortar stores, or both. Whereas previously franchisees would have typically operated physical stores, UK retailers are now starting to allow them to launch online stores as well. 

Emerging markets

UK retailers are increasingly looking at emerging markets, where an emerging middle class and the attractiveness of 'Made in Britain' is creating new opportunities. According to our research, top locations for international store expansion include China (42%), the US (38%), Germany (27%), India (21%), Turkey (19%) and Ireland (18%). 

No matter how much research you have done or how sound your business plan is, things will inevitably go wrong. Expanding overseas is an exciting time for any business, but it's important to not move too quickly and to dedicate enough resource to this, while steadying the ship at home. 

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at February 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.

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