Market expansion requires a localised approach that ticks all the boxes in meeting consumer demand. Prior to penetrating a new market, businesses should perform an in-depth market analysis to validate consumer demand and ensure that they are able to meet those demands with the right assortment.
Where Businesses Fail in Market Expansion
While it is a fundamental practice, most brands fail to perform market analysis as they lack the tools to carry it out effectively. Typically, brands would travel to the new market or territories and perform physical comp shopping, which yields incomplete information.
This process leads to missed opportunities and costly decisions. With no concrete data or numbers, brands can only see what their competitors are doing, not what is selling or what consumers are buying. On top of that, performing physical market analysis can be costly and time-consuming.
How to Gather In-Depth Market Insights?
Performing a SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis can help brands define their pivotal differentiators and recognise performance gaps. Identifying external opportunities and threats will also help in mapping out key areas to optimise. Ask yourself…
- Who are my competitors?
- What are their value propositions and how are these differentiated from mine?
- What are the local trends and what are the relevant channels to reach my target consumer?
To gather in-depth market information and validate local consumer demand with speed, Omnilytics provides strategic steps brands should adopt.
With the right tool, the process is straightforward.
Step 1: Identify Competitors in the Market and Analyse Their Assortment Mix
It’s crucial to first identify who your direct competitors are. Once the key brands or retailers in your segment have been established, review their product mix.
Studying your competitors’ assortments is a crucial step in market expansion. It not only identifies opportunities in the market but also indicates top-performing categories that meet consumer demand.
Determine the following:
Who are my Main Competitors in the Market?
The Omnilytics dashboard allows for a comparison of multiple brands and retailers at once. As seen above, we can see the trade analysis of 10 fast fashion brands in the UK.
For an in-depth analysis, compare direct competitors with similar assortment sizes and median prices to identify differences in strategies and performance that would not have been achieved through physical comp shopping.
What are Your Competitors’ Top Three Performing Categories?
To identify your competitors’ top-performing categories, focus on the categories with high replenishment rates. From this perspective, we conclude that dresses and tops are high-demand categories in the market, followed by shoes and outerwear.
Examine further down to the product level by analysing the most replenished SKUs to identify the top-performing styles.
Missguided’s most replenished dresses were made up of fitted silhouettes and casual styles, which signalled strong demand for weekend wear among its consumers.
Similar styles were observed for Nasty Gal, as its most replenished tops consisted of trend-driven blouses and bodysuits.
Key Takeaway: Analysing competitors’ product offering helps you spot market gaps. For instance, Missguided and Nasty Gal lacked in essential categories like pants and leggings that other brands can fulfil.
Step 2: Identify the Most Effective Pricing Strategy
Studying the performance of full price products provides accurate insights on competitors’ pricing strategy. More importantly, pay attention to the sell-out rates of the price points to determine if they resonated with the consumers.
By analysing the competitors’ price breakdown, we’re able to deduce:
What is the Market Overview on Median Price?
Missguided had a lower median price and a more narrow price spread than Nasty Gal. The lower price points showed that Missguided is positioning itself as a more accessible brand in the market. On the other hand, Nasty Gal had a higher entry point to maximise margins.
What are the Optimal Price Points that Align with Market Perception?
The above chart signals that Nasty Gal missed the mark in pricing. Market perception of pricing contradicted the brand’s positioning with low sell-out rates for full price SKUs. The brand had to rely on markdowns to drive sales, more so than Missguided, which recorded more sell-outs at full price.
Key Takeaway: Analyse the market to identify the optimal price points that align with consumer perception. The right pricing strategy will deter excessive markdowns, which can tarnish brand image and impact profit severely.
Step 3: Identify Key Distribution Channels
Studying your competitors’ distribution strategies provides a better understanding of the right channels for market expansion to increase market share and speed up stock movement. Often, brands will diversify distribution to leverage categories with a stronger demand on other online marketplaces or utilise other channels as a discounting platform.
Compare the competitors’ distribution channels and consider:
Who are the Major Online Marketplaces in the Market?
To start off, it’s important to take a high-level overview of the major marketplaces in the new market. In the chart below, we can see the largest retailers in the UK for the fast fashion segment, which gives us a general idea of the key players to look out for.
Next, dive into your direct competitors’ distribution channel availability. Your competitors’ presence on online marketplaces indicates where your consumers are shopping and what they are buying on different platforms. This, in turn, informs your assortment and pricing strategies to align with varied consumer preferences on separate retailers.
Missguided is available on two major UK retailers and tailors its assortment to the different multi-brand marketplaces. For example, the brand stocked products in the higher price points on Next with a higher replenishment rate and no discounting.
Meanwhile, Missguided products on Asos had a slightly elevated average discount percentage than on the brand’s own channel with just 9% replenished rate. This means that Missguided positioned itself to meet Asos’ consumer preference by stocking trending products at accessible prices.
How to Assess Which Marketplace to Enter?
Dive deeper and evaluate your competitor’s product offering across different retailers to first understand what and where customers shop.
While dresses remain the top category for all three retailers, there were disparities in other categories. For instance, Missguided had jewellery in its top 5 categories while Next stocked more shoes than Asos and Missguided.
This tells us that Missguided optimised its assortment by leveraging demand-driven categories by channel. The brand capitalised its swimwear and beachwear range by extending the distribution to Asos and Next, which saw greater demand than at its own site.
Key Takeaway: Analysing the performance of different retailers helps brands identify the right distribution channels in a market and tailored assortments based on consumer preferences. Leverage key categories in other channels and pivot pricing or discounting strategies to these channels where they are more effective.
Step 4: Identify Promotion Mechanics and Launch Timings that Drive Demand
There are a few metrics that can be analysed to outline the most effective discounting strategy. Compare competitors’ full price and discounted sell-out rates and sell-out rates for different markdown percentages to determine the depth of discounts that drive sales and what are the optimal discount ranges.
Next, study the promotional launch timings in the market to pinpoint sales periods like summer, local festivities or back-to-school season. Observing your competitors in the new market will provide the necessary insights to map out your market expansion promotional launches.
Consider the following:
What are the Discounting Strategies that Improve Sales?
From the above chart, we can conclude that both brands’ sell-outs were driven by markdowns. Nasty Gal edged out Missguided in this regard as nearly all its sell-outs were achieved through discounts. The brand’s consistent markdowns coupled with its high newness rate and low replenishment suggests that it relied on discounts to continuously move stock and make way for new products quickly.
Reviewing the competitors’ promotional activities helps us identify the varying discounts given out by competitors based on factors like seasonality and full price trade performance. Constantly monitor discount movements and adapt quickly where necessary.
The standout data from the above chart is the depth of discount employed by Nasty Gal. Most of the brand’s products were discounted at 50-69% – a much more aggressive discounting tactic than Missguided. The latter practised shallow discounting for most of its products.
Deeper discounts are more effective at grabbing the attention of consumers and amassing sell-outs, but brands have to consider the profit margins before employing heavy markdowns.
Does Your Competitor Focus on Consistent Promotion Activations and/or Seasonal Launch?
To identify patterns in promotions, analyse the calendar to determine markdown launch periods and frequency.
As we can see above, Nasty Gal tactfully launched a new promotion with every newness released.
Analyse when the competitors first initiate markdowns to identify discount launch patterns of the brands.
Brands that establish launch patterns tend to stick to the typical calendar. From this view, we can see that Missguided launched sales and promotions in the second half of the week in recent months.
Does your Competitor’s Discounting Strategy Vary Across Different Marketplaces?
Observe the competitors’ discounting strategy across different retailer platforms to outline the ideal approach for separate marketplaces.
From the above chart, it’s clear that Missguided’s consumers responded better to shallow discounts on its retail platform than on Asos, where deep discounts were more effective.
Key Takeaway: Study the local promotional calendar to determine key promotional events and sales periods in the market. This will help brands plan their own calendar.
Every platform has its own positioning and core customers. Understanding the difference will allow for targeted assortment and discount strategy that meets the consumer demand by each platform.
All the information gained from an in-depth market analysis is the key to outlining an effective market expansion plan, which will pave the path for your business. Spotting opportunities and risks in the market are easier with better visibility for a complete perspective.
Studying your competitors’ retail strategies are instrumental to pinpoint the products that will sell in a particular market, the right assortment mix, the optimal price points and the ideal discounting schemes to hit the ground running in market expansion.