Retail concepts get lost in translation

Discussion
Photo: James Tenser L to R: Martin Urrutia Islas, Head of Retail Innovation, Retail Experiences, The LEGO Group; David Marcotte, SVP Strategic Advisory Services, Kantar Consulting; Juan Carlos Garcia, Dir Global eCommerce & Omnichannel, Grupo Elektra, Mexico
Jan 25, 2018
James Tenser

“Why does retail fail so often when it crosses borders?”

David Marcotte, SVP strategic advisory services, Kantar Consulting, posed this question to kick off a panel discussion last week at the National Retail Federation Show in New York.

“Perhaps more importantly, what examples of successes can we identify?”

Retailers – even some of the most powerful – too often discover that triumphs in their home markets are no guarantee of winning elsewhere. When entering other countries, they frequently confront challenges in areas like:

  • Logistics and operations – licensing and real estate
  • Cultural understanding – employees and products
  • Brand development – marketing, logo and naming

Panelist Juan Carlos Garcia, director of global eCommerce & omnichannel for Mexico’s Grupo Elektra, said his company met cultural challenges in its efforts to export its retail concept to several countries in Latin America.

“We focus on customers who are not well served – especially by banks and consumer credit,” Garcia explained. In Mexico, Elektra’s offering blends basic banking and installment plans with merchandising of high-ticket items like TVs, furniture and appliances.

When entering more developed markets like Brazil and Argentina, where many consumers have internet and finance access, the company’s value proposition proved less compelling, he said.

Garcia drew a distinction between retail practices that are “mostly global” versus those that are “mostly local”:

What is mostly global?

  • Customer wants, like low prices, wide selection and speed of delivery
  • Technology platforms that leverage scale
  • Identify and develop the best talent

What is mostly local?

  • Payment methods (e.g., installments, cash and financing for large ticket items)
  • Supply chain and last mile delivery using local companies and local expertise
  • Taxation and compliance

Martin Urrutia Islas, head of retail innovation, retail experiences for Denmark’s LEGO Group, discussed his company’s success in spreading its brand via 132 owned stores in 10 countries and retail partners across 140 countries.

With so many far-flung outlets, LEGO must exert itself to ensure brand consistency. “There are some non-negotiable terms,” Islas said, “and we engage in a dialog with them.”

About 60 percent of sales each year are from new products, including licenses, he noted. LEGO uses its owned stores as test labs for both products and merchandising concepts.

“Retail is a media channel,” he said. “Every store is a theater.”

LEGO’s approach begins with putting the fundamentals in place to meet customer needs, he said. “Then provide the level-two experiences.”

Said Mr. Marcotte: “When moving from country to country it’s critical to understand the shopper first, but also recognize that the employee role is emerging as a key variable.”

DISCUSSION QUESTIONS: Why do retail concepts get lost in translation? What steps should retailers take to before expanding to new national markets? How important is finding local expertise?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Opening a retailer is not enough to drive brand awareness. The marketing plan should also be locally adapted to be effective."
"Most simply, if you are not prepared to understand where you are going, you will fail."
"I think tapping into local expertise is hugely important — if you don’t know that market you should make sure to engage people who do."

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13 Comments on "Retail concepts get lost in translation"


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Mark Ryski
BrainTrust

I believe one the of the fundamental flaws when expanding to new national markets is presumption of success. That is, assuming that just because what you do in your home market is successful means that it will naturally apply to another market. Target’s epic failure in Canada is a classic example. Canadians LOVE Target, but when they opened 130+ stores, the business tanked. What seemed obvious to Canadian shoppers, that apparently was lost on Target management, was that what they launched in Canada was a Target “lite” — low inventory, sub-par product mix, sterile stores — the Canadian Target stores were simply not the same as the U.S. stores and everyone knew it.

Charles Dimov
Guest

Good example, Mark. Much as Target is a strong retailer in the U.S., the Canadian effort netted a loss exceeding $2 billion. Not an international project anyone would want on their CV.

Lyle Bunn (Ph.D. Hon)
Guest

When the square peg of brand is fit into the round hole of market culture friction is guaranteed. The faster competitive pressures in the culture and consumer attitudes are considered for marketing campaigns, the faster success can accelerate.

Max Goldberg
Guest

Too often retailers who cross borders fail to take local customs into account. Walmart’s greeters might work well in the U.S., but they bombed in Germany. Tesco’s Fresh and Easy did not conform to U.S. shoppers’ likes and closed. Local customs and expertise are vital to making a successful transition across countries.

Art Suriano
Guest

I think that any retailer expanding into a new country needs to take their time, go slow, test carefully and make sure they understand the culture and that their product(s) will be successful. How often do we see articles stating that the XYZ company will open 100 stores in another country? One hundred? How about four? Let’s see if what you think works will work. Then you have the chance to iron out the kinks before moving forward. But often egos are involved with overconfident executives who say, “I have a gut feeling this is going to be a huge success.” That might be true in some cases, but it’s best to be sure. So go slow and make sure you understand the cultural differences, what the customer will want and if your brand will be the right fit.

Charles Dimov
Guest

To Mark Ryski’s point above, Target’s effort to get into the Canadian market is a prime example. Even though Canadian and U.S. cultures are very similar, something did not click and, to support the case above, supply chain and the last mile were the Achilles’ heel. As such, when two cultures are very similar, there may be a presumption that it can be done the same in the new country. To get it right, work with locals to get the nuances down and work with technologies that have done it before. Another good example is deploying an ECP and OMS into Asia only to then realize that you need double-byte character capabilities to work with Korean, Chinese and Japanese characters. Costly mistakes than can be avoided.

Ian Percy
BrainTrust

It seems to me the ultimate test of cross-border acceptance is in the restaurant/fast food category. The two text-book cases IMHO, are Skyline Chili and Swiss Chalet. The Target example that Mark cites so accurately is child’s play compared to exporting a food concept.

I totally understand why Skyline Chili works only in Cincinnati. Heck it even has its own language. Frankly, I don’t even understand why it works there. On the other hand I do not know why Swiss Chalet doesn’t work globally; that is apart from having a dumb name. In Canada the church crowd are on their way to Swiss Chalet before the benediction gets an Amen.

My advice is first, assume people won’t like it and then figure out what it will take to gain adoption. And second, think! I remember one company trying to invade Canada had the Statue of Liberty as part of its logo. Yup, that warms the Canadian heart.

Joy Chen
Guest

When entering a new market, brand awareness is key to success. One must understand the competitive landscape or loyalty and have a marketing plan in place to drive brand awareness to a retailer. Opening a retailer is not enough to drive brand awareness. The marketing plan should also be locally adapted to be effective.

Gene Detroyer
BrainTrust

McKinsey and Siemens did studies on why cross border has such a high failure rate. Both determined when everything is right in a deal from product to logistics to financing that 50 percent to 70 percent of the deals fail because of culture and communication. Retail is no different.

Most simply, if you are not prepared to understand where you are going, you will fail. Even Coca-Cola with their “secret formula” has dozens of different formulas for the countries they market in. “Copy and paste” is a ticket to disaster.

Cate Trotter
BrainTrust

I think it’s always important to know your market — and that goes double when moving into a new country. You can’t assume that what works in your home territory will work elsewhere, but equally you need to stay on-brand as overseas customers who are already familiar with your brand will know if you’ve given them a poor imitation.

I think tapping into local expertise is hugely important — if you don’t know that market you should make sure to engage people who do. That way you avoid massive missteps over local customs, payments, product assortment, branding, naming and any other areas where you could inadvertently be insensitive. Also, you don’t over-promise and under-deliver — you don’t want to offer free next-day delivery if the local logistics network can’t meet that.

Craig Sundstrom
Guest

I don’t think we can meaningfully generalize, either with regard to products or countries: how would one compare expanding to, say Venezuela vs. Luxembourg? The reality, sad or just “reality” depending on how you view it, is that many countries have so many problems with corruption, or regulation, or lack of infrastructure that you probably can’t get over the first hurdle.

But assuming you’ve already taken that into account and aren’t attempting a high-jump, e.g. the Luxembourg of the example, I think not understanding the market, not understanding that your product may not work … indeed, not even thinking how it might not.

James Tenser
BrainTrust

Retailers can suffer from what I’d call “prototype fixation,” where a store concept conceived and refined over many years in the home market seems like a sure bet in another country. When the stock market rewards the retailer in advance for simply announcing the plan, due diligence sometimes flies out the window. The very disciplines that led to home country success – market research, incremental learning, relevant assortment, employee engagement, cultural sensitivity – can be ignored in haste.
When successes do happen, it makes sense to look at why. Grupo Elektra has done nicely in Guatemala, Honduras, and Panama where aspiring consumers need the financial services it provides. LEGO’s focus on “playing well” has a universal appeal that seems to win hearts in China and Malaysia as well as the U.S. and Europe. Any retailer with overseas ambitions would do well to begin with an unblinking self-assessment to determine whether its strengths would be comprehensible in the foreign culture.

Ricardo Belmar
BrainTrust

Going cross-border to expand your retail business is much more involved than a cut-and-paste procedure! The most common reason we see failures is exactly what Mark Ryski highlighted — the presumption of success. Too often this means no consideration for what consumers in the new market like and dislike. Experience and convenience are kings everywhere, but how that is translated into the store varies from region to region. Local expertise is a must! Careful consideration of infrastructure is also important — more than just logistics, every infrastructure component must be looked at as not everything will translate from country to country.

wpDiscuz
Braintrust
"Opening a retailer is not enough to drive brand awareness. The marketing plan should also be locally adapted to be effective."
"Most simply, if you are not prepared to understand where you are going, you will fail."
"I think tapping into local expertise is hugely important — if you don’t know that market you should make sure to engage people who do."

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