Abstract

Economic growth and a rising middle class consumer base make emerging markets an attractive prospect for many international businesses. Changing patterns of retail in these countries present opportunities for business expansion that many are keen to capitalize on, but also present challenges for reaching their ambitions. This article examines the growth of the coffee shop industry in China–—considering its key dynamics and drivers–—in order to address questions about successful retail expansion in emerging markets. We aim to explore how changing consumer cultures have contributed to a rapidly growing industry and what strategies businesses have used to enter the market and maintain growth, as well as considerations for potential retail success in the future.

Strategies for future growth and a future research agenda

This article was designed to act as a starting pointfor a more systematic investigation of how different industries are developing in emerging markets. Emerging markets are often presented as an attractive arena ripe for growth, with international businesses from across economic sectors keen to capitalize on rising incomes, growing middle classes, and the opportunity to expand their international network. The coffee shop industry in China is a dynamic part of the retail sector with forecasts predicting continued growth for the foreseeable future. As coffee shops become ever-present in towns and cities across China, they have the potential to play an important part in urban lives. In other retail and commercial sectors, the potential for growth exists not only in China but across emerging markets. We present three recommendations for companies looking to internationalize in emerging markets. The first recommendation concerns culture. Consumption of goods and services involves a series of practices, some of which may not be present in emerging markets. Cultures—shared social values— need time to take root and are not geographically constant but vary from location to location. It is a culture of visiting coffee shops and using the space for different activities that supports the robust growth in demand for coffee in China; it is not a taste for coffee per se. Businesses looking to internationalize can and should support nascent cultures; as seen in the case of coffee shops in China, this can be done by looking at their offering not in terms of what they sell (coffee), but of what the consumers are buying (a third space). This opens a need for international businesses to benchmark their local competitors. Given that these businesses are likely to have a more in-depth knowledge of local cultures and consumer behaviors, their activities should be observed closely to consider what appears to be successful, to identify if there are gaps for future growth, or if there is some way to differentiate business operations to attract consumers.