Strategic market entry: when to follow and when to challenge
The decision of how to enter a new market represents one of the most critical strategic choices a retailer can make.
While conventional wisdom often suggests avoiding direct competition with established market leaders, the reality is more nuanced. Success depends on carefully analysing market conditions and choosing an approach that aligns with your company’s unique strengths and resources.
Following the market leader’s established playbook can offer significant advantages. Market leaders have already invested heavily in consumer education, creating established purchase patterns and proven revenue models.
By following their lead, you can benefit from their groundwork while focusing on incremental improvements in execution, customer experience or speed to market..
Consider how River Island and New Look initially followed Topshop’s lead in fast fashion, focusing on trend-led clothing at accessible price points.
They didn’t reinvent fashion retail; they refined the model with their own twist on style, store experience, and customer service. Similarly, George at Asda and Tu at Sainsbury’s successfully followed the Marks & Spencer model of offering fashion in supermarkets, but at lower price points.
This approach works particularly well when:
– The market is still growing rapidly
– There’s room for multiple players to succeed
– Your operational excellence can deliver better value
– You have the resources to match or exceed the leader’s quality
– Customer switching costs are relatively low
Conversely, challenging the market leader by offering a fundamentally different approach can be powerful when existing solutions leave significant customer pain points unaddressed. This strategy requires identifying meaningful gaps in the current market offering and having the capability to deliver a compelling alternative.
ASOS’s entry into fashion retail exemplifies this approach. Rather than building traditional high street stores like established retailers, they created an entirely digital fashion destination with a vast range of brands and styles. Their success came not from doing traditional retail better, but from reimagining how young people could shop for clothes.
Similarly, Primark disrupted the market with its extreme value proposition, proving that fashion could be both trendy and incredibly affordable, while Boohoo transformed the speed of fast fashion by building a purely digital business model with ultra-rapid product development cycles.
Consider disruption when:
– The market leader’s solution has clear limitations
– Technology enables new approaches
– Customer needs are evolving
– You can offer significant cost or convenience advantages
– You have a unique value proposition
Making the Choice
The decision between following or challenging the market leader should be based on three key factors:
1. Resource Reality: Challenging a market leader requires substantial resources and runway. Consider how Matches Fashion (which collapsed this year) needed significant investment to transform from a single boutique into a global luxury e-commerce platform. Without adequate funding and organisational capability, following the leader while focusing on execution excellence may be more prudent.
2. Market Maturity: In mature markets, differentiation often provides the only path to significant market share. Look at how JD Sports carved out its dominance in sportswear by creating a premium, trend-led positioning distinct from other traditional sports retailers, or how Joules built its niche with British-inspired casual luxury in a crowded middle market.
3. Competitive Advantage: Your strategy must align with your sustainable competitive advantages & Other Stories succeeded by positioning itself as a premium high street brand with a focus on quality and minimalist design, while Missguided (before its challenges) disrupted through social media-driven marketing and influencer partnerships.
4. Consumer trends: When customers continuously tell you what they want or expect and your current supply base can’t,or in some cases won’t, meet those demands. Most, if not all brands have their position within each market and are in some cases reluctant to change. Whilst in a lot of cases that is perfectly fine, and those brands will undoubtedly ride economic ebbs and flows, being able to react to those trends can offer an always on approach.
Success in market entry rarely comes from blindly following or opposing the market leader, but from making a clear-eyed assessment of market conditions and your capabilities. The best approach often involves elements of both strategies: learning from what works while identifying opportunities for meaningful differentiation.
Whether you choose to follow Next’s path of steady expansion and operational excellence or ASOS’s digital disruption, execution excellence and deep customer understanding remain the fundamental requirements for success.
By Stuart Middlemiss, Chief Commercial Officer, International Leisure Group/American Golf
