Andrew Climance, Retail & Leisure International Editor, posed the question ”Can internationalism in a recession be done?” and my below response was published in the March 2012 issue.
Despite one of the worst global recessions on record in developed economies, retailers in these countries are still planning for growth by expanding into international markets, which might at first seem a counter-intuitive strategy.
In fact, it’s one of the smartest things they can do in order to spread their risk across a number of markets of varying volatility. Tracking many trans-Atlantic retail moves, I have noted many top US and UK brands looking to further expand their reach across the water, some of which include Crate & Barrel, J Crew, Reiss, Victoria’s Secret, Abercrombie Kids, Orla Kiely, Coach, L K Bennett, Tory Burch and Patagonia.
While many others are sure to follow, they will all need to avoid being on the long list of trans-Atlantic retail casualties by taking a professional approach which includes adapting cleverly to the cultures and shoppers in their new geographies.
Over the many years helping retailers successfully transplant and translate their brands into US and EU markets – something I call BrandTravel™ – I’ve concluded that one of the most critical capabilities is developing and executing an intentional and methodical approach to internationalisation. With so many examples of retailers and leisure brands who have paid a high reputational price when getting it wrong, those who do approach expansion professionally do earn huge rewards.
So here are 7 tips for 2012 to help ensure your retail brand is fit for purpose in the international arena:
1. Manage “local” and “global” – managing this dilemma well separates the winners from the mediocre. It is possible to obtain scale economies while delivering local services and ranges as global food and drink brands have learned so well. Zara is amongst the very few in the fashion world who have created ranges specifically for their southern hemisphere markets rather than just selling them past season’s wares from its northern stores.
2. Transfer knowledge – opening stores in another market is not enough without also transferring what’s been learned from the culture, consumer behaviours and preferences in each market to ensure innovation and profits follow. Tesco’s Fresh & Easy small store US format had some costly merchandising hiccups at the start as a result of not applying the localisation lessons gathered from its expansions into Asian markets.
3. Be resilient - Being able to change processes, designs and manage costs in turbulent climates is a skill to be implemented by operations teams and the retail business leaders. Some setbacks are to be expected as part of the process of aligning the business to local cultures and tastes.
4. Assume difference – Checking assumptions about the target culture is a must, as BestBuy, Starbucks, Disneyland Paris and many others have learned at great cost. Starbucks recently attempted to market its Trenta size (30 oz) drink in the UK, larger than a full bottle of wine, which was seen as an overly-indulgent American “supersized” product not fit for European tastes. However, Coach only brought its US leather goods ranges to its recently-opened Bond Street store that it knows would appeal, leaving behind the “wristlet” (a small zip wallet with a carrying strap for the wrist) that is so successful in its home market.
5. Innovate through insight – Involve consumers and supply chain partners to identify which new technologies, materials, designs, services and mistakes can change the business model. Crowdsourcing not only lowers the R&D costs but engages your target markets with the knock-on benefits as they use social media to boast about your foresight and engagement.
6. Build the brand - Most consumers don’t know many of the soon-to-land-here trans-Atlantic brands… yet. Seize the opportunity to (re)position the retailer in a new geography, as Abercrombie & Fitch so successfully has in the UK. Without preconceived ideas of the company, that blank canvas gives permission to seize a space you might not seize in your domestic market. Victoria’s Secret, the mass market lingerie brand, will soon be launching in the UK with the chance to position itself with new customer segments.
7. Assume success - Approach new markets intentionally – not just by licensing or franchising but having it as part of the long-term strategy. Too often, expanding businesses treat their international growth as a “project” rather than as a core part of their long-term evolution, choking the initiative of critically-important capital and leadership resources. Knowing the international foray will pay off, based of course on research evidence which supports it, means such activities are properly funded and given the management attention they deserve.
Instead of the constant stream of headlines about brands that have not succeeded overseas, let’s replace those with some success stories about the companies that have done it right, that have been methodical, that have adapted and made great profits.
Internationalisation in a recession obviously can be done – it just takes some planning and will.