Traveling on a bus in Sydney not long ago, I saw a fellow passenger come on board with a Marks & Spencer package. Knowing the British retailer didn’t have any retail stores in Australia, I asked him how he got his package. He lit up with a smile and told me how great it was that Marks & Spencer now ships anywhere in the world at no charge if a customer orders £35 worth of goods.
It struck me how many retailers are expanding their reach globally—Walmart, Best Buy, Costco, Target, Macy’s, and too many others to list—and it’s no wonder. A growing number of globally minded retailers are striving to expand beyond their home markets and into other established and emerging markets where consumer demand is strong.
From greater localization capabilities to more enhanced marketing partnerships, vendors today offer options that not only establish but also grow global businesses. Many retailers are taking advantage of third-party fulfillment services, such asBongo, Borderfree, Borderlinx, International Checkout, and i-parcel. (See Forrester, “International Shipping Solutions For US Online Retailers,” Sept. 17, 2013.)
With strategies like free shipping and discounted prices, competitors are trying to entice consumers from anywhere. Latin American retailers led the way in 2012 with 14.7 percent composite retail revenue growth, followed by retailers in the Africa/Middle East region. At the same time, Deloitte reported that growth cooled from 6.3 to 4.3 percent for the US retailers in the Top 250 global retail pack.
As retail boundaries break down across the globe, retailers face a double-edged sword. On the one hand, the opportunities are substantial. On the other, globalization results in increased competition—and not just from down the block.
To succeed, savvy retailers must recognize that globalization requires substantial investments in time, money, and resources—and a solid understanding of potential customers in each market. Many retailers have failed due to several factors, including lack of sufficient knowledge of economic, political, and cultural environments.
One recent example that comes to mind is the fumble of British grocer Tesco with Fresh & Easy in the United States. After five years and over $1.6 billion invested, Tesco gave up in its battle to break into the US grocery market. According to the Wall Street Journal, one major factor was the subprime mortgage crisis and subsequent recession that ravaged many of the areas where Tesco located Fresh & Easy shops.
In devising a globalization strategy, retailers can benefit from a heavy dose of due diligence. Here are a few important boxes to check before moving forward with any global expansion strategy:
- Consider the economic and fiscal upsides, but also be brutally honest about the potential downsides. Recognize that return on investment may not be immediate. Every retailer that has ever expanded into foreign markets or has even thought about it knows only too well—globalization adds layers of complexity to every aspect of doing business. Merchandising, marketing, currency and language localization, store operations, real estate, logistics, human resources, reporting requirements, and tax policies all must be reevaluated in light of a new environment.
- Learn about local cultures—don’t just scratch the surface; put cultural variances under a strong microscope. Ask what unique value local consumers will derive from your products and services to be sure your company won’t be an also-ran. Consider varying shopping behaviors and consumer experiences. For example, studies show that Chinese consumers view websites differently than people in the United States and Europe and prefer to see more content rather than less. If you don’t have a crystal clear view of the customer, then you won’t be able to compete locally or globally.
- Evaluate all the options. It may not make sense to offer services in every target country. It may not even make sense to localize print catalogs in every single language. For years, British fashion retailer ASOS published a 100-page, high-end fashion glossy magazine for women, but the company could never afford to localize and mail the print magazine around the world. To expand reach internationally while providing even more cachet and interactivity for the fashion-forward, ASOS turned to digital publishing to easily localize content for multiple international markets and expand its reach globally, generating incremental revenue and boosting brand excitement.
- Look at the country’s infrastructure to make wise marketing decisions. If a region has broadly adopted mobile devices because landlines were never established, then devise a mobile-first marketing strategy.
- Be realistic. Determine what is right for your brand. In some instances, it makes sense to go global. In other situations, brands are better off staying put and competing in their own backyards.
While this may seem like common sense advice, there are dozens or even hundreds of variables involved in going global. Proceed with care and cautious optimism, and establish the right methodologies and solutions to assist in knowing the customer, whether here on home soil or halfway around the world.