You’ve done what you can in your home market, so is it time to consider overseas expansion? It may be, but be aware that things can be very different out there
On the face of it, there is every reason to consider setting up shop overseas. You may be doing well in the UK and have a national presence, but every pound in the till is the result of hand-to-hand fighting. Profits are hard won and even when you’ve got the right stock, the shopper can sometimes prove reluctant.
Not so in other markets – there are rich pickings across parts of Eastern Europe, Germany and further afield, all waiting to be harvested.
There may be many ways to skin a cat, but the options open to offshore empire builders are even more various. Franchise or company-owned? Partnership or go it alone?
In many instances a retailer’s hand will be forced by local conditions. If India, for instance, is the chosen destination, an incoming company has to open a store on a joint venture basis with the (very slight) majority holder being the Indian partner – it’s the law. In the EU, by contrast, retailers can pretty much do as they please if a site is available and the money is in the bank.
All of which should be a given and if you want to trade in a specific market, then that’s the way it is. The tricky bit is dealing with the other options that are on offer and choosing the one that’s most appropriate for you.
Michael Poynor, managing director of consultancy Retail Expertise, provides a wry comment about offshore retailing: “If you want a store overseas, open a website.” He qualifies this, however, by saying: “If you are going in with a partner as the first step, then being able to buy out the partner is a no-brainer.”
Poynor says that regardless of the market that is being entered, there is an issue about the fitness of the company that you buddy up with to act as your partner. Or put another way, if partnership is the chosen route, then the real job is assessing the partner as much as understanding local conditions.
And ‘partners’ in this context may mean anything from a benign, but uninvolved investor – one that is enthusiastic about your brand or retail proposition, to a ‘host’ retailer that proposes a shop-in-a-shop as a toe in the water. The latter route is well established, with Ted Baker succeeding with its global network of stockists, or ‘trustees’ as the company calls them. These are host retailers that act as stockists after being vetted by the brand and frequently this has provided an entry route into a market, prior to the opening of standalone stores.
On occasion, the system may even have a knock-on effect, such as the trustees on the West Coast of the US, which have been shopped by Japanese tourists and which have, in part, led to the decision to open a Tokyo flagship in March this year: Ted Baker’s first foray into Japan.
Due diligence will naturally form a fair part of any overseas venture – whether of the market or an interested partner, but how do you go about working out whether a country or a company is a good prospect? The answer would seem to be to know your customer at home – then look for the same, or similar, in the country in which you are looking to establish your brand.
International sales account for 60% of Karen Millen’s revenue and joint managing director Gemma Metheringham says it’s essential to understand overseas customers. “Detailed market and demographic research is carried out ahead of entry to any new market. The Chinese market, for example, presents a huge opportunity with an emerging middle class,” she says.
Finding out if the appropriate demographic is on hand is central to success then. As for choosing a partner to help you make things work, there is little difference between doing this and conducting a job interview.
Bear in mind that no matter how well-qualified a potential partner may appear, you have to be able to work together.
Quite irrespective of whether you have the right stock and have found the ideal location, you must ensure your supply chain is up to the job. A distribution network is relatively easy to set up in mainland Europe as the majority of shipments can be made by road to almost any destination within a couple of days.
But suppose the siren call of the US market is heard. Are your logistics robust enough to deal with the distances involved on that continent and the little matter of getting stock there? If you choose to be truly global, remember seasonality.
Before setting sail, thought should always be given to whether your business at home is solid and, equally, whether you really have exhausted all the local possibilities.