When Wesfarmers bought the British home-improvement chain Homebase in 2016, the UK looked like a promising market for Bunnings. It was large, wealthy and familiar, with an established home-improvement sector and more than 200 Homebase stores providing an immediate national footprint.
Wesfarmers paid A$705 million for the business and planned to convert the stores to the Bunnings Warehouse format over three to five years. Within little more than two years, it had abandoned the expansion and sold Homebase for £1 after heavy losses and writedowns.
Several things went wrong. Bunnings removed popular Homebase categories, including kitchens, bathrooms and decorative concessions. It introduced products and merchandising based on the Australian model, replaced experienced local executives and entered a market where established competitors such as B&Q and Screwfix already understood British home-improvement customers extremely well.
The UK had plenty of customers. The problem lay in how closely the Bunnings proposition matched the way those customers wanted to shop.
Market size only tells you part of the story
Population, household income, category growth and consumer spending are useful measures when comparing countries. They help establish whether a commercial opportunity exists and how large it might become. But consumer brands need to go further because demand for a category does not automatically translate into demand for a particular proposition. Two countries with similar spending power can have very different expectations around product, price, service, shopping experience and distribution.
Coffee provides a good example. Starbucks entered Australia in 2000 and expanded rapidly, eventually reaching 84 stores. Australia was wealthy, urbanised and had a strong appetite for coffee, yet Starbucks struggled to establish the position it had achieved in many other markets. Australian consumers already had a sophisticated café culture shaped heavily by Italian and Greek immigration. Independent cafés offered espresso-based coffee, experienced baristas and an established social experience around coffee. Starbucks arrived with a proposition developed largely around North American preferences, including sweeter drinks, larger servings and a standardised store experience.
By 2008, Starbucks had closed 61 of its 84 Australian stores and absorbed losses of roughly A$143 million. It retained a much smaller network, concentrated more heavily in tourist locations and areas with younger consumers. The size of Australia's coffee market had looked attractive, but the existing consumer culture and competitive environment made the original rollout much less viable than the headline demand suggested.
Understand what consumers already value
A useful market assessment looks at the existing behaviour of customers in the category. What do they buy? Where do they buy it? How frequently do they buy? What do they pay and what influences their choice? These questions become particularly important when a brand's success depends on a specific consumer behaviour.
Swiss coffee brand Nespresso, part of Nestlé, built its international business around a tightly controlled system of coffee machines, proprietary capsules, boutiques and direct customer relationships. The model gave the company recurring capsule revenue and supported its premium positioning across markets.
North America presented a particular challenge because many consumers preferred larger cups of coffee than the espresso-oriented system originally delivered. Nespresso responded with VertuoLine in 2014, offering larger serving sizes designed for North American consumption habits.
The company retained the elements central to the Nespresso proposition: the machine-and-capsule ecosystem, premium positioning, controlled coffee quality and direct customer relationship. It adapted a part of the product that affected whether consumers would use the system regularly.
If customers use the category differently from customers at home, the economics of the proposition may change with them. Market research needs to surface those differences before launch.
Look at the competitive structure of the market
A large category can look attractive until you examine how established competitors already serve it and what customers value about them. Walmart discovered this in Germany after entering in the late 1990s through the acquisition of the Wertkauf and Interspar chains. The acquisitions gave Walmart an immediate store network, but they also gave it two businesses with different systems, formats and operating histories, in a grocery market where Aldi and Lidl had already built extremely efficient discount models and strong associations with low prices.
That made Walmart’s traditional competitive playbook difficult to reproduce. German regulations constrained some aggressive pricing practices, while Aldi and Lidl operated highly disciplined, low-cost formats that Walmart struggled to beat on price. Walmart also introduced elements of its American retail culture, including greeters and highly scripted customer-service practices, which did not fit comfortably with German shopping conventions. Its management and labour practices created further friction with employees and unions, adding operational problems to an already difficult competitive position.
Owning stores did not give Walmart a compelling reason for German shoppers to change their habits. It had entered a large and valuable grocery market, but its local competitors already performed strongly on the attributes that mattered to customers, particularly price and convenience, while parts of Walmart’s own proposition added little value in the German context. Walmart withdrew in 2006, selling its German operation to Metro and recording a pre-tax charge of about US$1 billion.
Bunnings encountered a related problem in the UK. B&Q and Screwfix already understood British home-improvement customers, while Wesfarmers removed parts of the Homebase offer that customers valued and introduced elements of the Australian Bunnings model that fitted the market poorly. When we assess competition for a consumer brand, we need to understand the sources of incumbent advantage, the customer behaviours that sustain it, the channels competitors control and the specific reason customers might switch to a new entrant.
Examine how customers actually buy
Route to market can change the attractiveness of a country considerably. Retail concentration, ecommerce penetration, marketplace usage, dealer networks and distributor structures all influence how quickly and economically a brand can reach customers.
BYD's expansion in Southeast Asia shows how closely product and route-to-market decisions can connect with local conditions. Rather than relying on a narrow vehicle range, BYD offered compacts, sedans, SUVs, seven-seaters and plug-in hybrids across markets with different incomes, transport needs and charging infrastructure. In Thailand, it worked with local distributor Rever Automotive and invested in local manufacturing. Across the region, its broader product range allowed the company to address consumers at different price points and accommodate markets where charging infrastructure remained uneven.
For a consumer brand, the practical question is whether customers can find, evaluate and buy the product in the way they expect. A strong proposition can struggle if it relies on a retail structure that barely exists in the target market or requires distribution economics that destroy the margin.
Work out what needs to travel unchanged
International expansion always raises questions about adaptation. Consumer brands need a clear view of which elements create their competitive advantage and which can change without weakening the proposition.
IKEA provides a useful example. Its flat-pack products, Scandinavian design, self-service model and tightly managed cost structure give the business much of its global consistency. The company has still adapted store formats, services and product presentation as it has expanded.
In China, for example, IKEA introduced assembly services and adjusted the way it presented products for local living conditions. More recently, smaller city-centre stores and planning studios have allowed it to reach consumers who may not travel to traditional suburban warehouse locations.
The relevant decisions depend on the brand. Product formulation may sit at the heart of one proposition, while another relies on price, service, design, exclusivity, convenience or the retail experience. Management needs to understand those sources of advantage before deciding how much adaptation a market can support.
Test willingness to pay, not just interest
Consumer enthusiasm can produce misleading signals. People may like a brand, follow it online or express interest in its products without accepting the price required to make the market commercially viable. International pricing includes more than currency conversion. Freight, duties, distributor margins, retailer margins, taxes, returns and local operating costs can push the final price well above the domestic equivalent.
The competitive set may also change. A premium Australian product can find itself competing with established local brands that customers already trust, while a mid-market product at home may move into a premium price bracket once international costs enter the equation.
Market selection should examine the price consumers currently pay for comparable products, the value they attach to the brand's points of difference and the margin left after the full route-to-market cost.
Build consumer fit into your international market selection
At Dearin & Associates, we use a Market Opportunity Ranking to compare international markets systematically. For consumer brands, the indicators need to reflect the way consumers discover, evaluate, buy and use the product.
Category size and growth remain important, alongside factors such as household income and economic conditions. The ranking can also incorporate category maturity, consumer behaviour, willingness to pay, competitive intensity, ecommerce adoption, retail structure, distribution access and the amount of product or proposition adaptation required.The weighting will differ by brand. Ecommerce penetration may carry considerable weight for a digitally native fashion company, while retail concentration may matter more for a packaged consumer product. A premium brand may place greater emphasis on affluent customer segments and willingness to pay than on total population.
A country that looks attractive because of its size may fall down the ranking once competitive intensity, channel access and consumer behaviour enter the analysis.
Choose the market where your proposition has room to work
Bunnings had a successful Australian model and entered a substantial UK home-improvement market. Those strengths could not compensate for decisions that failed to account adequately for local shopping habits, product preferences, competition and the value customers already found in Homebase.
BYD approached Southeast Asia differently, aligning its product range, partnerships and manufacturing investment with conditions across the region. Nespresso adapted its coffee system to accommodate a fundamental difference in North American consumption habits while preserving the wider brand and business model.
Market size establishes the potential prize, while consumer behaviour, competitive conditions, willingness to pay, channel structure and the adaptability of the proposition shape how much of that opportunity the brand can realistically capture.
Our Market Opportunity Ranking helps consumer brands compare markets using the factors that will actually drive commercial performance. If you're deciding where your brand should expand next, book a Global Growth Decode, a 15-minute conversation to assess where your proposition is most likely to travel well, what may need to change and which market deserves closer attention first.
