With both Tesco and Superdry pulling out of international ventures on the same day, Retail Week asks whether UK retail is scaling back its global ambitions.

  • One retail expert believes the “era of UK retailers expanding globally and flag planting is well and truly over”
  • After retail’s significant hit due to the coronavirus crisis, retailers are refocusing on their areas of strength
  • If a brand translates internationally, digital expansion via overseas partnerships is considered the easiest route

On Thursday last week two very different UK retailers on two very different trajectories revealed they were pulling out of international markets.

One was the UK’s largest grocer Tesco, which is selling its ailing Polish business to Danish mega-retailer Salling Group.

Tesco Lotus Thailand

In March, Tesco sold its Southeast Asian operations for £8.5bn

The supermarket giant, which first entered Poland in 1995, is selling off 301 supermarkets in the country, its head office and associated supply infrastructure for £181m.

Poland is the latest international exit for Tesco, which during Dave Lewis’ tenure as chief executive has offloaded its operations in Turkey, South Korea and China. Most recently in March it sold its Southeast Asian operations in Thailand and Malaysia for $10.6bn (£8.5bn) in cash.

At the other end of the scale is struggling high street fashion brand Superdry, which revealed it is terminating its joint venture with fashion group Trendy, which has run its Chinese business since 2016.

Superdry described the split as “amicable” and chief executive Julian Dunkerton maintained China is a “huge opportunity” for the retailer.

While the two are very different businesses, what does this retrenchment mean and is the era of retail internationalisation over?

No flag planting

Dunkerton blamed the effects of the coronavirus on bringing the split forward and although he still believes China is “a huge opportunity for Superdry in the longer term”, he says the way people are shopping has been upended.

“As the way people are shopping there changes, it makes sense for us to shift our focus to the growth channels of online and wholesale,” he says.

Although Tesco’s move is not reactionary to the current environment, it is part of a wider strategic goal of retrenching to reinforce its position as the UK’s biggest grocer.

Lewis insists that Tesco will continue operating its Central and Eastern European businesses in the Czech Republic, Slovakia and Hungary where it has “stronger market positions with good growth prospects”. 

“The era of UK retailers expanding globally and flag planting is well and truly over, and has been for some time”

Nick Everitt, director, Edge by Ascential

Edge by Ascential director Nick Everitt believes generally that the “era of UK retailers expanding globally and flag planting is well and truly over, and has been for some time”.

Karina van den Oever, partner at consultancy Elixirr, agrees and says the coronavirus crisis has made many retailers realise they are spread too thinly.

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Last week Superdry terminated its joint venture with Chinese fashion group Trendy

“Retail’s challenges have been exacerbated over the last few months [by the coronavirus]. Anyone who was reliant on physical stores and footfall has suffered significantly,” she says.

“That’s where the retrenchment has come from. Retailers are realising they need to refocus – whether that’s on the home market or, if they are more successful overseas, then overseas.”

Everitt believes that retailers looking to pull out of international markets to cut costs now risk missing out on growth in the future.  

“You could argue that by exiting these regions, the likes of Tesco are missing a trick,” he says. ”By becoming smaller it means you don’t have the buying power. The UK is a much lower growth market than Asia is, and even parts of Europe. So the growth opportunities and buying power will be less strong.”

Tesco’s approach is at odds with international rivals such as Walmart. In its last financial year, Walmart’s international arm generated sales in excess of $120bn (£96bn) while Tesco’s overseas businesses turned over £10bn over the same period.

International partnerships

However, van den Oever is not convinced overseas offers retailers the biggest growth potential. “For me the only guaranteed retail growth anywhere is through digital,” she says. ”Running international businesses is hard work, and retailers are going to go after easier growth.

“If they do look overseas it will be with a partner. They’ll only do it if it makes sense from a capital perspective,” she says. “If your brand has strength and can translate internationally, doing it digitally is probably easiest.”

Everitt agrees, and suggests that Tesco, for example, could partner with big overseas players in the ecommerce space.

“I think the future is less about geographical expansion and more about partnerships. Particularly with ecommerce players around things like last-mile delivery.

“If your brand has strength and can translate internationally, doing it digitally is probably easiest”

Karina van den Oever, partner, Elixirr

“That’s a space already where nearly every retailer is looking to partner with a Deliveroo or Instacart, or other third parties to optimise efficiencies.”

He says if UK retailers don’t play in this space “they will have to partner with the likes of an Amazon or Alibaba”.

The unforgiving UK retail landscape has only been exacerbated by the pandemic and British retail appears to be entering a period of isolationism. The road back to a more outward-looking retail sector will require a more collaborative, light touch and digital route than in previous eras.