Retail concepts get lost in translation
“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?