One conclusion was that retailers will have to investigate the key themes that are bringing about change in the world and develop strategies accordingly. A major theme is the global shift in population, with the prediction that the world’s total population will jump from 6 billion to 9 billion over the next 40 years. This is largely down to growth in developing continents such as Asia and Africa. In contrast, the population in Europe is set to fall.
This suggests that a sensible long-term strategy for European retailers would be to tap into this shift by gaining exposure to the faster-growing regions, because they clearly provide the greatest future opportunities
This is undoubtedly why we are seeing an unprecedented level of UK retailers making the move overseas. Among these is Marks & Spencer, which recently announced its intention to increase overseas sales through a push into China.
This is great news, but M&S, like many other retailers, will know all too well that there is a legacy of failures. UK merchants have confidently planted their flags abroad only to find overseas customers were not as keen on their propositions as those at home. Dixons, Laura Ashley, Body Shop and Sainsbury’s were among the many well-known operators to succumb on international soil.
With such a litany of failed ventures, why try again now?
One answer is that much has been learnt from those earlier forays. For starters, retailers now know that they cannot venture overseas in a vacuum, but instead must work with local partners and embrace different cultures.
There are also many alternative ways to enter new markets in addition to the wholly owned store route. Franchising has been gaining in popularity; joint ventures are also proving lucrative for many retailers. Carphone Warehouse is operating about 200 Best Buy Mobile stores in the US through a JV with Best Buy, with the intention to open 1,000 by 2009.
What is providing assistance to UK companies at the moment is awareness of domestic retail names and popular brands overseas. Consumers in these markets have access to the internet, read global fashion magazines and are well aware of our well-known brand names.
This has created strong demand and should be grasped by retailers because it is likely that, in 40 years, the Asian markets will have developed their own superbrands.
This shows why retailers’ strategies not be built in isolation from what is happening outside their stores’ walls and beyond their country’s shores.
PAUL CLARKE National director, retail and wholesale sectors, Barclays Commercial Bank