Looking beyond the UK for retail growth
The stagnating UK economy means that for many retailers and brands, growth will have to come internationally. An event hosted recently by the British Retail Consortium (BRC) outlined the opportunities, and the strategies to employ when considering new markets.
Describing the weak UK economy as a major driver for international expansion, Kevin Rusling, international director at George at Asda, says there is less than 3% growth forecast for the UK over the next few years. In contrast, there is "significantly more" growth predicted in other markets.
However, he emphasises that if your business not healthy in the UK, then it would be unwise to try to internationalise.
When considering new markets, the supermarket retailer considers whether its products will fit into the same market demographic, whether consumers have the same body shape, how much competition there is, and whether George will be able to get retail space in key trading areas.
It also needs to understand the price it would sell at in each particular market, as well as the duties that would impact its price points.
Partnerships and structure
How companies structure their business abroad, and who they choose to partner with, are key components of international success.
Esprit's VP and head of global partnerships, Alex Cara, says that in territories with high potential and high levels of operational synergy, retailers would probably want to operate their own stores. Whereas countries with lower market potential might be better operated through a franchisee.
When looking to franchise, a strong partner is key, says Cara. When it comes to its partners, Esprit considers whether they have access to real estate, are financially stable, and have retail experience, local influence and contacts.
"It's important, when you are trading in the Far East or the Middle East and you're based in Europe, that you can just pick up the phone and resolve an issue and deal with problems over the phone rather than getting on a plane. It's really important that you have that relationship and you invest in it.
A major bone of contention between brand owners and franchisees is deciding who manages the e-commerce side of the business.
While e-commerce is potentially lucrative, it can also create headaches and confusion between the owner and franchisee when consumers buy from the UK site instead of their local one, for example.
Debenhams' international director Francis McAuley believes the franchisee should be able to buy the e-commerce division. Additionally, McAuley explains that if consumers buy online from the retailer's UK operations, they are unable to return their products to its international stores.
Indeed, Rusling says that deciding whether a franchise agreement includes the online operations is one of the key sticking points when it comes to entering new markets.
Rusling notes that there aren't any retailers that operate a franchise agreement or an international operation that they don't wholly own where they are also retailing online. "Because you then get into: 'who is in charge of marketing, who is setting the prices, who manages customer returns?'.
"So for those of us who have already gone international and playing catch-up from that dot-com shift, it is quite complex.
"For those of us who haven't started, take the Australian market, which is three times bigger online than it is for franchise and 50% of those online sales come from non-domiciled companies," Rusling says.
"There are some territories that we will absolutely go in online, rather than through franchise. But you've got to have one strategy, one team leading it."
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