Breaking Into New Markets Not As Easy As It May Sound
We may live in a global village, importing and exporting products willy-nilly, but setting up shop in far-flung countries has mixed results.
Retailers spreading their wings to offer "choice" find it is not always a straightforward process. Knowing how far to go, and how quickly, how to introduce themselves and win over the natives are all challenges that require time and effort.
Yet surviving in new markets is likely to become a necessity over the coming decades in order to grow. And sometimes it works. The Guardian reported in February "bumper takings at Britain's Asda supermarkets helped the world's biggest retailing group, Wal-Mart, beat US economic blues with a 5.8 percent rise in underlying annual profits to $12.8bn (£6.6bn)." Wal-Mart has 4,000 stores in the U.S. and 2,900 in other countries. But some of its ventures, notably in Germany and South Korea, have been considerably less than successful.
Tesco, meanwhile, has opened 50 American Fresh & Easy outlets in less than six months - albeit having to deny observations from analysts that consumer response has not been as enthusiastic as predicted. Like Wal-Mart, much of Tesco's business is spread throughout the world with varying degrees of success. In recent months it has been fighting its employees in Poland over claims of long hours and low wages.
French-based Carrefour and LeClerc, too, have expanded and retracted. And the list goes on. All of these companies and others, struggle in countries other than those where they got started. Dean Best, acting editor at just-food.com recently wrote, "Going global is often seen as a panacea to problems at home."
Frank Dell, president of Dellmart & Co. and a RetailWire BrainTrust panelist, sees the situation almost the other way around, noting that one reason, at least, for the fact that several retailers have already "failed big time" stems from a belief in their own PR. Successful companies, he believes, "don't necessarily spend enough time understanding their own culture and why they are successful or understanding the culture of a new country. Furthermore, some have not yet maxed out their own markets."
Likewise, Ryan Mathews, founder and CEO of Black Monk Consulting and also a BrainTrust panelist, said "retailing may be becoming global in scope, but successful retailing is always local in execution. And, before an execution can be successful, the retailer must have a profound working understanding of the culture of the market (or country) they are moving into. Do your homework upfront - learn markets on the markets' terms and you'll be alright. Charge in blindly because you're a success in your home country and the results are bound to be less than satisfactory."
Discussion questions: Why do many retailers struggle expanding to other countries? What is the best way for retailers to introduce themselves to a new market and establish themselves with the locals?