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Purpose – This paper aims to examine the important factors that influence foreign retailers' expansion in China. By doing so the paper proposes business strategies for foreign retailers to be successful in China and other emerging economies.Design/methodology/approach – A case study approach is employed to build theory. Five case studies were chosen, including the world's four largest retail firms: Wal‐Mart, Carrefour, Metro and Tesco, as well as the Japanese department store Heivado.Findings – The paper identifies six important activities in successful retail expansion: adaptation to the external environment; responses to psychic distance; establishment of business networking; localization; entry strategies into new areas; and the role of local management team. A new framework articulates the interdependent relationships between various factors embedded in retail internationalization, including external environment, internal drivers, psychic distance, and expansion strategies.Practical implications – The...