There are many ways to grow your business. You can sell a new product, court a new type of customer, or expand into new territories—even across the globe. Ecommerce technology is making it increasingly easy to expand into global markets. 

Here’s how expanding your business’s geographic reach works, plus an example from Verve Coffee and guidance for overcoming challenges from P.F. Candle Co. CEO Kristen Pumphrey.

What is geographic expansion?

Geographic expansion is a business growth strategy in which an existing business focuses on selling products or services in a new region. Geographic expansion efforts might include establishing an on-the-ground presence, licensing intellectual property to another business, or partnering with local businesses—in locations where you aren’t currently operating.

An example of geographic expansion

Verve Coffee’s international expansion is one success story. In 2016, the California-based company expanded its operations to Japan, opening its first café outside of California in Tokyo’s Shinjuku Station. Cofounder Colby Barr discusses the company’s cultural fit in its new market on an episode of the Shopify Masters podcast.

“Japan is an amazing place with an amazing culture. They love West Coast brands, and they have impeccable taste and really care about craft,” he says. “For us, there’s just a resonance.” 

This cultural alignment allowed for Verve’s expansion to become an instant success.

Methods of geographic expansion 

• Online geographic expansion
• Multilocal strategy
• Strategic partnerships
• Franchising and licensing

Geographic expansion doesn’t always entail opening a new brick-and-mortar location, especially if you sell products online. Here are four common location-based growth strategies:

Online geographic expansion 

Online geographic expansion involves entering a new region through a digital strategy. Online expansion is popular with ecommerce business owners as a way to pursue geographic expansion without physically setting up shop internationally.

Online expansion efforts involve developing marketing strategies tailored to new regions, translating or localizing content as needed, and configuring your checkout to serve consumers in the new market. You can use Shopify’s Managed Markets to offer customized experiences by region, accept payments in local currencies, and automate tax and duty collection on international orders.

Multilocal strategy

A multilocal or multidomestic strategy involves replicating business operations in a new market but adapting product lines and marketing materials for local audiences. It can reduce supply chain costs by using local distributors and increase shipping speed by operating local hubs. This strategy is popular with companies that sell in markets with significant cultural differences and markets that are far away from each other. 

For example, a US-based interior design firm might establish East Coast and West Coast local offices to better serve clients with the design styles popular in those regions. This will expedite shipping and resourcing, and accommodate more customers across time zones.

Strategic partnerships

Businesses can also team up with local partners to facilitate market entry. Strategic alliances can provide access to local infrastructure and expanded brand awareness. Local partners can also help you understand the culture of a new geographic location and navigate relevant local laws.

Franchising and licensing

Franchising and licensing are market entry strategies in which an existing business authorizes another company to use its intellectual property in exchange for franchise fees, royalties, or both. It’s a strategy popular with media and entertainment companies and service-based businesses.

Tips for geographic expansion 

• Research the market and the competition thoroughly
• Comply with local laws and regulations
• Use the right technology
• Develop a global brand management strategy
• Optimize your supply chain

Geographic expansion is a common growth strategy, and becoming an expert in the process can provide a competitive advantage and position your company. Here are tips for a successful approach:

Research the market and the competition thoroughly

Geographic expansion is a significant undertaking, and it comes with risks. Even online expansion can require a significant investment. Conducting thorough market and competitor research can help you choose the best locations for geographical expansion. It can also help you understand the factors that drive success there and determine the most efficient path to market entry.

You can use market research to get to know consumer needs, identify relevant market forces, and explore the cultural nuances of a new region. You can also use competitive analysis to identify market leaders, study their strengths, weaknesses, and positioning. You can identify market gaps and understand the marketing practices that drive success with local consumers.

Comply with local laws and regulations

Depending on your geographic expansion model, you may be subject to a number of local laws and regulations. If you establish a business in a foreign country, you’ll be subject to that country’s regulatory agencies, and if you have employees, you’re required to follow local labor laws.

If you sell products to international clients from a US business, you’ll also be responsible for collecting and remitting value-added tax (VAT). This doesn’t have to be a chore. Shopify Tax makes VAT compliance in the EU and UK simple. Complying with local laws governing product requirements and data protection regulations is also necessary.

Use the right technology

Look for an ecommerce platform with flexible market-based features. Shopify offers the option to sell in multiple markets from a single store. You can customize experiences by market, access international fulfillment assistance, and use international sales tools like multicurrency payments, automated duty and tax collection, and compliance support.

Develop a global brand management strategy

A global brand management strategy defines your brand presence in international markets. It also involves clarifying your approach to standardizing and localization. Standardization emphasizes consistency across markets. Localization adapts products, practices, and brand materials to meet the needs of consumers in different regions.

Most companies find a balance somewhere between these two approaches. For example, you might standardize your product line and core brand messages. But you may translate content into local languages, localize your content for different markets, and run local social media marketing campaigns.

Optimize your supply chain

Geographic expansion can increase supply-chain-related expenses, but as your business continues to grow, it can also reduce them. Say you sell socks. They’re made in Mexico, warehoused in the US, and shipped to customers worldwide. Once you reach a critical number of customers in Western Europe, you might decide to rent warehouse space in the EU. This allows you to bulk-ship products, significantly reduce shipping expenses, and offer faster order fulfillment.

Overcoming the challenges of geographic expansion

• Fulfillment
• Cultural differences
• Distributor partnerships
• Trademarks

Geographic expansion poses several challenges, from increasingly complex regulatory environments to the security implications of distributed operations. Kristen Pumphrey, the co-owner, creative director, and CEO who took P.F. Candle Co. global, has addressed the challenges of international growth head-on. Here are a few key challenges she highlights:

Fulfillment

International fulfillment can be expensive and increase your risk exposure.

“The first big consideration is the logistics,” Kristen says. “There are laws, tariffs, shipping, time, regulations, and other factors that complicate getting your products to people outside of your borders.”

Manufacturing or warehousing from afar can have security implications and complicate your production and vendor management processes as well.

“Take it market by market and see if you can find a partner or adviser that knows the market well—as well as your category and brand—to guide your decision making,” Kristen says.

Cultural differences

While you may have a strong marketing strategy in your current market, it may not transfer to others.

“What works for marketing in the US is unlikely to work in other countries, and business practices may be different,” Kristen says. “This is where an agent or distributor can really come in handy.”

A difference in expectations became clear when P.F. Candle started working with distributors in China.

“We entered with an American strategy of wide distribution, but this created tension between the resellers with regard to pricing and brand representation,” Kristen says. “In the end, we worked with a distributor who is selling us online, but also placing us in stores.”

Distributor partnerships

Local partnerships can help you manage your brand in new markets, but finding the right partner can be hard.

“If you work with a distributor, the biggest challenge is how they are representing you,” says Kristen. “You need to provide a lot of assets—photos, design guides—and double-check the work to ensure it’s a proper representation.”

Trademarks

P.F. Candle Co. faced challenges trademarking its brand in China.

“They have a different approach,” says Kristen. “It’s first to file, not first to market, and a bad actor filed trademarks in our name under several key categories. It took quite a bit of money with legal fees to fight these,” she says, adding, “If you’re thinking of expanding, make sure you get the trademarks and URLs locked down.”