Retailers offered up a broad range of advice to their peers about international expansion during a Retail Gazette roundtable on 2 February.
“Be brave”, “don’t be greedy and stay in your lane”, “accept it’s a learning curve”, and “be prepared to be surprised in new markets” were the quick-fire soundbites retail guests gave when asked to give their comments on key factors to consider before entering a new territory.
Another attendee warned that understanding specific logistics involved in a new market will have a significant impact on future business success when it comes to international expansion strategy.
These reflections rounded off an insightful and detailed discussion on cross-border commerce, involving representatives from a wide range of retailers and brands including Alexander McQueen, Crew Clothing, Fat Face, H&M, John Smedley, Johnstons of Elgin, Lush, Matchesfashion, Missguided, New Era, Sports Shoes, THG, and White Stuff.
The event was run in partnership with cross-border commerce company Flow Commerce, which was acquired earlier this year by Global-e.
Retailers around the table agreed international expansion requires a “test and learn” approach, and several of them said the advent of e-commerce has made identifying which territories to target simpler than in past generations.
Quirks of international expansion
While the size, proposition and budget of a retailer will clearly impact how an organisation builds an international expansion and marketing strategy – as it will necessitate different approaches and targets – there are common nation-specific quirks.
Roundtablers discussed how in Russia taking “cash on delivery” of an item is still a regular way of transacting with consumers, while there are also services where shoppers order several items before trying them on while a courier waits at their property. The items that are not required are then instantly returned to the same courier.
In China, consumers often buy in bulk for wider family use, which can result in higher than the UK average order volumes for home delivery.
However, the biggest consideration when choosing a new international territory to start serving in is arguably the fact that one size does not fit all. In the US, east coast and west coast are typical target areas – but it is more challenging for UK brands to succeed in between there and, certainly, outside of the major cities.
Also, Shanghai and Beijing alone, can individually provide a market opportunity the size of many other countries as a whole, according to Bill Leach, global sales director at clothing brand John Smedley.
“Achieving success in China does not necessarily mean adopting a country-wide approach,” he added.
“Japan provides 35% of our business globally and it made us think we could have some success in China. Even though the two markets are remarkably different, we are now looking at Shanghai and Beijing as two of our biggest growth projects on the horizon.”
He added: “It’s also worth noting a ‘copy and paste’ approach to retailing doesn’t work in China – it is its own entity and needs to be treated as such.”
Tips and techniques
The event attendees were not short of guidance for others on what works well when expanding operations internationally or when testing the waters of new markets.
Milly Bisset, marketing director of Johnstons of Elgin, said: “It’s more of an e-commerce approach for us.
“There’s more data available that way, and we’re able to test media and get an appetite for the product before building critical mass.”
In-depth localisation is crucial, suggested another guest, adding that once a retailer has tested and learned about customer behaviour it’s vital to focus on translation, and localise logistics and marketing. “It makes a massive difference to conversation rates,” she commented.
The advent of e-commerce means there is more access to data, noted Seb Villien, head of e-commerce at White Stuff.
“From the sales and traffic data you can identify one or two countries that might work, but you need to test the water more fully before diving in,” he said.
“A good starting point to marketing internationally is to follow a similar recipe to your home market. Unless you’re a retailer with mega bucks, my advice is to take a test and learn approach, start small and quickly go in increments. One way to do this is to split new geographies into smaller territories – for example focus on a few cities rather than the whole country.”
Steve Brackstone, senior partner manager at Lush, said: “The most important thing to us when considering entering a new country is to find the right partner, someone who understands our values and is willing to put these front and centre when building the business in their territory.
“Everything else can be worked on if your business partner is in tune with the core mission and values of your business.”
Will Crumbie, CEO of Fat Face, added: “You need to learn as you go – it’s the best way of understanding what works, and then you link all your findings up.
“We’ve had success in North America, and we’ve targeted certain areas in the region rather than the US as a whole. We also like to do as much as we can from the UK as possible because it limits risk and cost and allows more control over key processes.
Bisset added that successful international retailing is “all about understanding your different customers and cultures in each market” and “making sure your proposition appeals whilst still building a consistent brand”.
What’s holding retailers back?
Retail finance bosses’ unwillingness to invest is a common complaint heard across retail divisions, and it is certainty proves a drag for those responsible for driving international growth.
For some, international expansion is curtailed due to resource. Retailers around the table spoke of the two sides to that coin.
Firstly, UK retail operations are typically already at stretching point due to the demand of modern consumers and business models, so simply finding the time to enter new territories is prohibitive. On the flip side, some retailers said it is possible to be too successful and not have the resource to deal with unexpected demand.
“In retail, everyone is busy and reporting stretched bandwidth already,” explained Bisset.
“Quite often you have to prove the model before staff and resources are provided for the new venture internationally, but that is not a sustainable model if you are looking for rapid expansion. There is always an element of risk.”
She went on to say: “We currently resource most digital marketing activity out of the UK as we explore expansion into different markets, but are now looking at how we use more in-market partners to support us.”
What is more, when dealing with issues in territories outside a retailer’s home market, “the smallest things can take up a disproportionate amount of time as you push your brand values through”, Bisset added.
Summing up the pitfalls of expanding internationally without the right infrastructure in place, Crumbie said: “Businesses can lose focus on their core markets as everyone loves chasing the shiny new thing.”
A dose of reality was brought to the table too, with one retailer saying during the challenging last few years – defined by the UK leaving the European Union and all the red tape and complexities that accompanied it, and then the pandemic – “preserving cash and nothing else” has been a key priority for the industry. That in itself has arguably stemmed UK retail international expansion in recent times.
What was clear from the discussions though, is that retailers should be seeking cross-border expertise before deploying their international strategies.
The use of consultants can be an expensive mistake, according to several of the roundtablers in attendance, but companies specialising in cross-border trade and those which can “take a lot of the leg-work away” for retailers can be a real help, it was generally agreed.
“When it comes to working with Department for International Trade or other related service providers on overseas market introduction service-type needs, you just need to provide a really good brief, and you’ll reap the rewards,” explained Leach.
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