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“Testing the water” – prior-online market entry in China

Sina Hardaker (Department of Economic Geography, Julius-Maximilians-Universität Würzburg, Würzburg, Germany)
Ling Zhang (Department of Geography, University of Central Arkansas, Conway, Arkansas, USA)

International Journal of Retail & Distribution Management

ISSN: 0959-0552

Article publication date: 16 March 2021

Issue publication date: 8 July 2021

2527

Abstract

Purpose

The paper aims to investigate the new market entry strategy of the international grocery retailers Aldi Süd and Costco in China; analyzing if and how their prior-online market entry reflects a strategic response to organizational challenges in the Chinese market, which is a pioneer in the use of digital technologies and the provision of digital services.

Design/methodology/approach

The article identifies major challenges faced by international grocery retailers in China and discusses these with the help of the conceptual approach of embeddedness. The paper is based on expert interviews with senior executives of the two international retailers and other retail specialists and consultants.

Findings

The prior-online market entry by Aldi Süd and Costco represents a strategic response to organizational challenges that have to be faced in an increasingly challenging and highly digitalized Chinese market. Prior-online market entry allows the two retailers to experiment with the unique and heterogeneous Chinese market and build network and territorial embeddedness to facilitate the establishment of the physical store network. Both retailers utilize online stores to build relation and network with suppliers and customers and to understand Chinese consumer preferences. Yet, the localization strategy of Aldi Süd and Costco vary greatly.

Originality/value

Grocery retailers' prior-online expansion strategy has not yet been the focus of academic research. In regard to global grocery retailers, such as Aldi Süd and Costco, previous research argued that they were prepared to accept a lower expansion speed in order to expand at minimum risk and cost and mainly in countries which are regarded as having higher cultural proximity. The paper reveals the potential of the prior-online market entry strategy to change the internationalization behavior of grocery retailers. In addition, it contributes to the understanding of the evolution of market entry strategy into advanced digital economies in the coming new decade.

Keywords

Acknowledgements

The authors are greatful for the interviewees’ time and expertise. Further, the authora would like to thank Sina’s collegue Alexandra Appel, who provided helpful comments on an earlier draft of the manuscript. Las but not least, the authors are grateful to the two anonymous reviewers for their valuable suggestions and comments. All errors are authors.

Citation

Hardaker, S. and Zhang, L. (2021), "“Testing the water” – prior-online market entry in China", International Journal of Retail & Distribution Management, Vol. 49 No. 7, pp. 1111-1129. https://doi.org/10.1108/IJRDM-10-2020-0406

Publisher

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Emerald Publishing Limited

Copyright © 2021, Emerald Publishing Limited

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