As Tesco looks set to exit the US, Retail Week takes a look at why British retailers have found it a tough market to crack.

Why is the US an attractive market for UK retailers?

A highly-lucrative and developed retail market, the US has long been attractive to British brands which have achieved maturity in their home market. The added advantage of the US being English-speaking makes the expansion process, including finding property, more straightforward.

Why is the US so tough to crack?

Because it is well developed, the US market is also very well served with advanced retail chains. In Tesco’s case it was not just up against Walmart but also Trader Joe’s and SuperValu meaning fighting for market share became just as tough as in the hard fought UK market. Add to this a slowdown in the economy since 2008, different shopping habits in different seasons, a focus on very strong customer service and the logistical challenges of gaining the scale to be profitable in such a huge country, and the market becomes less appetising. Conlumino managing director Neil Saunders says: “The US already has many great retailers who are knowledgeable and customer-centric. You have to run twice as fast just to keep up with the competition and it’s not like Asia where there is a lot more virgin territory to go at.”

Which UK retailers have taken a stab at the US?

A number of UK grocers including Sainsbury’s, Marks & Spencer and now Tesco have launched failed attempts to crack the US retail market which Standard & Poor’s estimates is worth $540bn. HMV, Dixons, WH Smith and Laura Ashley have also expanded into the US before retreating.

Why have they failed?

A number of circumstances have led to each retailers’ failure. Sainsbury’s problems in its domestic business forced it to sell its Shaws chain in 2004 as the grocer looked to focus time and resources on its core market. Tesco, too, may have been afforded a little more time by investors, analysts and ultimately Philip Clarke if the UK business had not been in difficulty.

M&S pulled out of fashion retailer Brooks Brothers in 2001 and then from its other investment in upmarket Kings Supermarkets in 2006. “M&S investment in Brooks Brothers was always a bit of a vanity acquisition, they did not understand the heritage of the brand,” says Saunders.

Elsewhere, Laura Ashley’s classic old English style was expected to have appealed to Americans, however it failed to catch shoppers’ imaginations, while WH Smith sold its US airport and hotel stores after the economy slowed following the 9/11 terrorist attacks in 2001.

Is there still potential?

Sir Philip Green clearly believes so. The billionaire tycoon’s sale of 25% of his Topshop and Topman businesses last week to US private equity firm Leonard Green & Partners – which counts J Crew among its investments – allowed the business to become debt free and gives the brands the local expertise to expand in the US with considerable intent. Ted Baker, Karen Millen and Hotel Chocolat are just a few UK retailers to set up successful US operations.