Retailers are expanding internationally for many reasons. For some it’s saturation in a home market; for others it’s the chance to exploit an identified opportunity in a new territory.
But for all it’s a chance to chase growth and build a new customer base that can take a brand global. And the online world has made it easier to do than ever.
So when it comes to taking a physical presence overseas, which route should retailers choose? Should they go it alone or de-risk and enter with a partner, whether through a franchise, licence or concession agreement? That decision depends on both the retailer and the market.
For some territories, taking a partnership approach is either obligatory – as in the Middle East, where working with a local franchise partner is dictated by law – or advisory, as with Russia, where it is easier to go in with an established partner than risk the potential problems of going it alone.
For others, the challenges of the market simply mean that a partner is easier. Marks & Spencer said last year that it could not expand in China alone and so would seek a partner.
In other markets there is no right or wrong answer and it’s down to the retailer to decide on which path to follow.
Choosing a franchise partner can allow easy entrance into a market since it will be with someone that already knows the country or region well. This can allow easier, faster market entry.
The lines of communication are also clearer because it means working with local, experienced people and getting immediate feedback on which products will work in that market and which might not.
But the choice of franchise partner has to be a considered one, because it means not only entrusting a brand to them, but the brand experience and image too.
Some franchise partners may fail to translate that, a danger especially for fashion retailers. Where the retailer has less risk, it also of course has less profit, so it is necessary to consider the potential gain and effort involved in internationalisation.
For some larger retailers, corporate-owned stores are the way to go. Many that started on a franchise route have since bought back those operations.
Others are mixing routes. Earlier this month, Ted Baker reported continuing strong sales in the US, where it has a mix of own stores and concessions, and in the coming months it plans to open licensee stores in places such as Dubai, Qatar, Taiwan and Thailand.
Behaviour is changing. The ability to test an international market first with a dedicated website, or to analyse international traffic to a home website, means that retailers can enter a market with far greater knowledge of what the likely demand will be and can tailor their plans accordingly.
A few years ago, retailers were less confident about going international, but now the world is a much smaller place and retailers are looking at European-wide strategies that can be as diverse as a choice between Manchester or Milan, or Birmingham or Berlin, rather than filling in stores along the way.
Today retailers can take larger stores in bigger cities and showcase their brand, supplementing some of the smaller towns that they would once have infilled internationally via a franchise partner with efficient local ecommerce capabilities.
Going international, while sometimes challenging, has never been easier.
- James Ebel is executive director of Harper Dennis Hobbs