A group of experts at today’s Drapers Fashion Forum revealed their insider advice for global expansion, focusing on the franchise model and their tips for success.
Find the best franchise partner
Ray Clacher, executive vice-president, Gieves & Hawkes, Kent & Curwen and Hardy Aimes: To expand into countries you don’t know, you have to find a damn good partner. You have to find someone who is already doing something great where you want to be. Study them, and study their competition. And do some experimentation with a partner first. Don’t expect high rewards right away. Also, depending on the scale, plant someone from your own team there to work with them every day, because if they don’t get the simple bits right, the product won’t work.
Franchises can be more cost effective
Andrew Skinner, managing director, Coast: At Coast, when we wanted to expand overseas we had our target markets but to commit financially to open and run stores abroad is difficult. You can do franchises with less financial commitment, not paying for the shop fit, not paying for the stock. Having the right partner that can balance that risk and open the brand in great-looking stores is the key. For us it’s been a very cost-effective way of expanding into new territories that we could not have done ourselves.
Scour the small print, and have an exit plan
Andrew Skinner: At the start, when you’re setting the deal up make sure it’s the right deal on both sides – you both have to be able to make money. Check your small print. Think about bank guarantees, make sure you are going to get paid. Usually the first couple of years are good, but then you might hit a bump in the road.
An example is Russia. We came out two and half years ago. With what was going on at the time in retail and finance, we were asking ourselves: Are they going to be able to pay for the stock? So we had to have an exit plan. If you’re a brand where your margin for error on the financial side is quite tight, make sure the deal you set up is sound.
Be careful with the details
Ray Clacher: In 2008 I went to Chengdu. Our franchise partner in the west of China had taken all of our architect drawings of our stores here to open a store there. We gave him the mood boards and drawings and trusted him. I flew over to visit the store. I looked up and it should have said “Gieves & Hawkes, no 1 Savile Row”, but it said “not Savile row”. The lesson is be very careful with franchises. They can be fabulous partners, but it can go wrong. You need to learn the local rules too: can you serve alcohol, things like that. Your local partner should help you, but you have to do your homework.
Should you be flexible with your products in franchises?
Andrew Skinner: We do specials for the big markets, so if the market says we need – it could be sizes, style, colour, coverage – we will do specials that are right for the market, as long as the majority of the range with that partner is on brand and the core collection. One of the risks of franchises is being arrogant, you have to be able to be flexible and do what your market wants.
Ray Clacher: I think the franchise partners, the best ones, are the ones who give you the hardest time. They know their customer and they know what they want, so you have to adapt. But there still have to be the things that make your brand what is it. Whatever you’re doing in London, you should be doing globally. It should always feel like the same brand.
Help your partners provide the best customer experience, but also learn from them
Olga Kotsur, chief executive and founder, Mecaux: Franchise partners don’t know your brand as well as you, give them access to all your product information to give your customers the best shopping experience. When brands invest so much into digital content but don’t translate that into all stores, it’s a waste. You should give the same content to all your stores, so no matter where the store or franchise is, you have the same information. If the experience in stores around the world isn’t consistent, that could become challenging.
Ethan Solomon, vice-president sales, Adyen: It’s important to try to have a singular technology base because that gives the retailer the ability to be agile. All over the world you have to entice the customer to identify themselves in store so you can get their information. You need mechanisms in place to learn as much about your customers all around the world.
Also, payment is key. Most international payment cards are not used in China, for example. Alipay is huge, China Union pay has 1 billion cards issued. WeChat has 1 billion users making payments. As much as you need to be global with customer experience, the local payment method mix is very important. And then things like Alipay are now being rolled out around the world for the travelling Chinese shopper.
Is Brexit a worry for your international business?
Ray Clacher: I don’t fear it. The only thing I fear is currency because most of what I make is in Europe. But life goes on: every year there is a challenge in retail. The sad part for Britain could be: are great European brands going to start thinking differently about the UK? I know two good French brands that have pulled out of stores in London.
Andrew Skinner: We keep thinking we should be getting ready for Brexit, but what can you do? You just have to wait until you know something and be ready to be flexible. We’re asking: are there going to be tariffs? What sort of size are they going to be? But they’ll be the same for every retailer, so it will kind of be like for like.
What markets are key for the future of franchise?
Andrew Skinner: For us the future could be North and South America, we’re not there at all. The US is hard – one of the hardest to break into and make money. It’s all about finding the right model.
Ray Clacher: We’re really keen on South Korea at the moment: it’s a huge business, particularly for menswear formalwear. They have some great licence partners – they know what they’re doing. The hard thing at the moment is that you could argue they don’t need another brand. On another scale, Kent & Curwen is linked up with David Beckham. We’re looking at the countries where David is popular – the football capitals. Brazil and Mexico – we want to give that a go. It’s a very good and complex market. The obvious one, and the world’s biggest, is still North America. Try as you may, you always come back with your pants down. You have to spend a lot to even get in there. And Europe is still a challenge, as there is no one big partner to plug into.