Carrefour’s acquisition of 224 stores in Taiwan runs counter to recent strategic retreats from international markets of many once-global food retailers. International expansion remains a viable route to growth for food retailers, but only if the lessons of the past can be learned.

The evolution of economies and industries often comes in waves and cycles. A veritable tidal wave of corporate activity came in the 1980s and 1990s, driven by internationalisation through mass-market retail.

This particular period can be best remembered by Sainsbury’s bizarre foray into Egypt. With the gift of hindsight, we see now that Sainsbury’s acquisition in this part of the world was something of an expensive mirage and I do not anticipate that new chief executive Simon Roberts will be buying tickets on the night boat to Cairo anytime soon.

Even so, geographic expansion remains a central component of retail growth strategies, both offline and online, as many businesses seek to build out their brand potential and operational capabilities in a drive to sustain growth. Furthermore, once they are quite mature in home markets, internationalisation is again a relevant potential route to revenue growth.

“It is a certainty that, in another generation, there will be other tales of overambitious international expansions to tell”

In the 1980s, we were asked which retailers we thought could become truly global players. At the time, the three that came to mind were Carrefour, with its impressive new French hypermarkets; Sainsbury’s, which had the Savacentre format plus a growing business in the noth-east of the US, and the menacing Walmart, with its impressive inventory control and US Supercentre model.

As it turned out, Sir Terry Leahy and his team at Tesco eclipsed Sainsbury’s in the UK and as the new millennium arrived it would be Tesco that would establish itself as the key global player from the UK. As predicted, Walmart would become the number-one offline retailer in the world, with Carrefour and Tesco vying for the second and third spots.

How things have changed. Yes, these three organisations remain major retailers with international presences, but they have significantly retrenched their reach. Considerably and permanently so in fact, in a world now dominated by the likes of Alibaba and Amazon.

Walmart arguably commenced this process of retreat two decades ago when it exited Germany, South Korea and Thailand. Tesco also has undertaken a remarkable volte-face in its strategy and hugely reduced its international reach having already exited from: China, Japan, Taiwan, Turkey and the US, with Malaysia and Thailand set to follow suit later this year. Even its business in Poland is seemingly on the market.

Given these humbling experiences, what are the lessons for today’s retailers that may wish to explore internationalisation?

Four key factors come to mind, which if Carrefour, Tesco and Walmart had observed them, would have saved a great deal of shareholder resource from being wasted:

  • Secure the home market. An easy – common sense, really – point to make, but one that has led to management and financial capital redeployment in the past. Core markets are the heart of international retail businesses and when these wobble, everything tends to suffer. This has been the central through-point of Carrefour, Tesco and Walmart’s stories over the years.
  • Understand human diversity. There is much corporate rhetoric around thinking locally while being global. However, more often than not, there is an imbalance that favours the latter. This in turn results in one size not fitting all, which in time means that local competition rises to the challenge of the new arrival and ultimately sees them off, usually buying their assets in the process.
  • Understand the limitations of the balance sheet. Core markets tend to fund internationalisation, which can be a long-term investment programme that is very capital consumptive. If the core wobbles and the cash flows dry up then typically the expansion plans cannot be seen through – ultimately the precondition of retrenchment.
  • Beware the digital world. When the then global big three were starting to cross borders, the internet was in its infancy. A generation on, it is a central component of non-food retailing and is starting to become more notable in grocery too. Being multichannel is almost a pre-requisite for strategic progress in advanced markets that most major retailers still may consider entering and consolidating, as we see with Carrefour’s acquisition of Dairy Farm’s assets in Taiwan.

It is a certainty that, in another generation, there will be other tales of overambitious international expansions to tell. Yet, if those future businesses can learn the lessons from the past, those efforts may not entirely have been in vain.