Overcoming challenges in two-sided marketplace expansion

By Simran Singh, Director of Business Development, Hyperwallet

Target, the American discount retail giant, made its first major expansion effort into Canada in 2013. The company bought the leases to 220 Zellers locations (a prominent Canadian retailer) from parent company Hudson’s Bay and began an aggressive push into the country, opening 124 stores within ten months.

Canada seemed like a good fit: culturally, economically, and politically similar to the United States, Canada’s strong dollar had Canucks crossing the border in droves to hunt for bargains—a trend of which Target was a major beneficiary. The company’s brand was already familiar, popular with consumers north of the border. What could go wrong?

Stop me if you’ve heard this story before.

Target’s Canadian expansion was nothing short of a disaster. Stores often opened in what seemed to be mid-renovation, and customers complained over the high prices and disappointing selection. Logistics challenges left many shelves empty. Despite the pre-launch hype, Canadians quickly soured on the retailer.

Target closed its 133 Canadian locations less than two years later, abandoning its expansion into the country. The misstep cost the company upwards of USD $5.4 billion and left 17,000 Canadians out of work. Despite years of planning and preparation, one of America’s largest retailers stepped outside of its home market and fell flat.

Learning from others’ mistakes

What can two-sided e-commerce and on-demand marketplaces—companies like Deliveroo, BlaBlaCar, and Hitmeister—learn from Target’s failed Canadian expansion and apply to their own growth strategies? For one, execution is key. Maybe Target spread itself too thin, opened stores too soon—either way, it left Canadian consumers with a poor first impression. The other lesson here is that you can never know too much about your chosen expansion market. Target was prepared for its launch, and it still ran into problems that it didn’t anticipate.

The reality is that most marketplaces choose to expand into new countries with far less information than Target had. Like the American retailer, many marketplaces choose nations in close proximity, with comparable regulatory and financial environments. Others choose to follow their competition, opening in new markets only after they’ve proven to be viable. Few put in the kind of thorough analysis of the global marketplace landscape that they need to ensure their best shot at international success.

At Hyperwallet, I’ve spent a lot of time talking with marketplaces that are preparing for (or are in the midst of) their own global expansion efforts. From those conversations, I know that there are many less-considered factors that can play a large role in determining a marketplace’s success. I also know that the ideal market for a company’s expansion is rarely the first one they’d expect.

The 2018 Marketplace Expansion Index

With that in mind, Hyperwallet has built the 2018 Marketplace Expansion Index. This extensive report and interactive map tool were designed to help companies become better informed before reaching into new markets. From our thorough analysis of 209 countries using a wide range of sources, we’ve settled on a list of 36 countries that are most ideal for marketplace expansion. The Index enables companies to compare them side-by-side, giving equal consideration to each country’s opportunities and challenges.

In keeping with the theme of this article and to illustrate that there’s nothing uniquely terrible about Canada (Hyperwallet was actually founded in Vancouver and we still have offices there), here are some of the difficulties that companies will have to overcome in several popular marketplace expansion destinations:

United States

Despite being home to many of the largest two-sided marketplace brands in the world, freelance employment is not as prevalent in the United States as it is in other major countries. More than 20 percent of the American population still doesn’t have access to the Internet, and only 50 percent of online shoppers have made a purchase through an international marketplace or retailer. This, combined with the dominance of incumbent marketplaces, can make the US a tough market to crack.


India’s online population is booming, making it an appealing target for marketplaces hoping to harness the country’s rapidly-developing market. But despite the government’s efforts to attract foreign investment, India has amongst the worst marketplace-readiness rankings in terms of the ease of doing business. Regulatory hurdles make scaling in the country difficult, and poor payment infrastructure and a largely unbanked population are bound to create supply-side headaches.


Denmark boasts the highest sharing economy participation of all Scandinavian countries, with roughly one-fifth of all online Danes transacting on an e-commerce or on-demand marketplace in the final months of 2016. Nonetheless, retail e-commerce growth is slow in the country, and the regulatory environment remains a major uncertainty. Just ask Uber: the company exited Denmark earlier this year following the introduction of new taxi laws.

South Korea

With amongst the highest smartphone and internet penetrations in the world, South Korea’s population is eager for the goods and services made available by foreign marketplaces. The government, however, has indicated a preference for smaller, local enterprises over multinational platforms. Additionally, ‘sharing’ has a very specific cultural meaning in the country, which can create trouble for newcomers hoping to turn a major profit.

Preparing for your marketplace expansion

These examples aren’t meant to dissuade you from pursuing your own marketplace expansion. Instead, what I want to illustrate is the importance of thoroughly evaluating a market before committing your resources. If the ultra-successful Target can make a mistake, anyone can. The best way to mitigate your risk is to know before you grow.

Download Hyperwallet’s full, 133-page 2018 Marketplace Expansion Index and check out our interactive expansion map here.

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