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Three Steps for Creating a Successful Route to Market Analysis

March 11th, 2015

No matter how great your product is, choosing the right retail channel and the best retailer for it can be a key determinant of success when entering a new market.  While there are dozens, even hundreds, of factors to consider when entering a new market, this post will focus on three key areas to consider once you have selected a market to enter:

  1. Evaluate the distribution landscape for your product
  2. Identify the strongest distribution channels for your business
  3. Prioritize potential retail partners

 

Step One: Evaluate the distribution landscape

No matter the product you want to sell, understanding different distribution options in your new market is an essential first step.  Think beyond which retail channels are the biggest or fastest growing – it’s more important to understand where consumers are going to buy your product. For example, if you are going to sell dishwashing detergent in Brazil, it is exciting to see internet retailing in Brazil has grown at an 18.9% CAGR over the past five years. It becomes less interesting when you learn 99.8% of all dishwashing products purchased in Brazil are store-based purchases. The other 0.2%, in case you’re wondering, is through direct sales.

Step Two: Identify the strongest distribution channels

Once you understand the top distribution channels for your product, decide which channel is going to be the right play for your business. To run with the dishwashing detergent in Brazil example, let’s say that since the vast majority of sales are store based, you want to target the type of stores consumers visit most to get into the biggest channels right away. Once you’ve identified that supermarkets and hypermarkets have the highest share of dishwashing detergent sales in Brazil, you’ll want to dive deeper to understand areas such as the strength of the channel overall, the leading retailers and how fragmented the market is.

In Brazil, hypermarkets are growing faster than supermarkets, but hypermarket’s share of dishwashing detergent sales are declining. It’s also important to understand that the top three retailers in the Brazilian hypermarket channel control more than 80% of the market, while in supermarkets, more than 40% of the market is made up of smaller, in many cases, independent operators.

You’ll need to decide things such as: Do we want to enter a channel that is growing faster overall or growing faster for our product? Do we want to enter a channel where we can achieve scale quickly with one retail partner, but potentially cede more control to the retailer, or do we want to work in a more fragmented market and potentially have more equitable partnerships, but need to work with a wide variety of partners?

Step Three: Prioritize potential retail partners

After you have decided on the right channel for your business, decide on the right retail partner or partners. The top supermarket retailer in Brazil controls almost 20% of the market but is losing share, while the number two player has grown from a 3% share to a 12% share in only five years. Does it make more sense for your company to work with an established player or an up and comer you can grow with? Does the retailer have a presence in other channels that they could help you expand? Do you want to work with a local player that knows the market or a multinational that could have more resources at its disposal? How is your potential partner addressing the move towards omnichannel and the mobile / in store shopping convergence?

None of the questions in this post have easy answers, but having the data you need to make the right strategic decisions for your business makes all the difference. Euromonitor’s Retailing industry research and category level distribution information can help you analyze where customers are shopping for your product, understand the most promising retail channels and provide key insights on potential retail partners. Our custom research can help you go one step further and help understand areas like how your competitors are positioning their products in your target retail channels or city level distribution for your product. Understanding these key elements will have a big impact on the success of your market entry strategy.

 

Watch our recorded webinar “Using Passport for Route to Market Analysis” for further insights.

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