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International Retail: Going Global – Beware of rampant wishful thinking.

Richard F Wolff, Director of International Retail at Javelin Group, shares his dos and don’ts for global retail expansion.

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DO…GOYA. In our early days at M&S, we were shown a video called GOYA – it stood for Get Off Your Arse. When it comes to international, by all means conduct desk research to narrow down likely markets. But then GOYA and visit them. Sales assistants can be a great source of intelligence – they’ll tell you everything you need to know about the market in question.

DON’T…suffer from rampant wishful thinking with your business plan. People generally overstate achievable revenue and understate costs – especially marketing, recruitment and real estate. Be realistic and accept you’re unlikely to achieve the productivity return per square metre you do at home.

DO…assess the pros and cons of all business models. Fully owned, joint venture, franchise, license – there are plenty of options but what they offer varies and can change quickly. Nor does one size fit all. For example, franchising is the model of choice in the Middle East but not in continental Europe where the margins won’t support it. Online take up and utilisation fluctuates from place to place too. Europe’s certainly not one country. Work out what’s right and where – don’t rush to a decision.

DON’T…underestimate the time it takes to find good real estate. Bricks and mortar retailers may no longer need as many stores as they did a decade ago. But location is even more important, both as a marketing presence and to complement online activity. You won’t find good real estate from a warm London office, so employ someone who knows your target market well.

DO…share your vision with your overseas partner and resolve any potential issues before signing the contract. I’ve seen too many examples of what’s referred to as ‘Same bed, different dreams’. Partnerships work best when both sides genuinely want the other to prosper.

DON’T…even consider international if you’re not trading well at home. Some hope going abroad will provide a welcome diversion from domestic problems. It won’t. Starting a fresh battle when you’re already taking a beating will only end in two heavy losses.

DO…ensure the essence of your brand can actually be exported. If you’re a middle market retailer at home, you want to be the same internationally. Do careful on the ground comparative shopping to see what price you’ll need to sell at and establish whether or not it will make you a profit. It’s no good being forced to price up – you’ll soon be found out and it’ll do nothing for your credibility.

DON’T…suffer from insufficient buy-in at all levels of the business. International can’t look like the chairman’s latest toy. Your local country managers must also report to someone with clout – in a big business the international director, in an emerging company the chief executive.

DO…listen to your local country managers. In my experience, most international failures have come through people appointing local management and receiving their advice only to tell them why they’re wrong. This makes no sense at all – you employ them precisely because they know their territory better than you do. Logistic experts are another key hire. You need to put the resources in to get the rewards.

DON’T…think you can take your eye off a territory once it’s up and running. Even the best country managers need regular communication – it’s a lonely job running Hong Kong or Chicago. Show visible and frequent support through good times and bad.

DO… allow enough in your budget for unexpected issues. Entering a new territory will inevitably bring both pleasant and unpleasant surprises – you’ll need extra funding for the unpleasant ones.

DON’T…think you’ll get rich quick from going abroad. Having successfully launched in a market, you’ll need time to assess whether you’ve got something that will work in the longer term and then make further tweaks to keep you on course. You may well get rich – but it won’t be quick.

Extracted from ‘Going Global: 30 Years 30 Insights’ by Piper, the leading specialist investor in consumer brands. For more information or to order a copy, please go to piper.co.uk

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