International Expansion: Product Adaptation Without Jeopardising SKU Productivity

This post will answer the question “how much product adaptation is needed and healthy for a brand starting its international expansion?”

In answering the question, I am going to use examples from fashion and lifestyle companies, as I’ve spent the majority of my professional life in those industries.

Trends – and especially fashion trends – are becoming more and more global! But very often the timing of when a trend becomes economically effective still varies. Additionally, there are still country specific differences in terms of colours, fits, styling preferences and details. You don’t believe me? Just invest a few Euro or some time to check out any of the big fashion magazines (Instyle, Vogue or ELLE) and compare them with their UK, Russian, Italian and German editions of the same month. Or check out their respective websites – for example Vogue Italy, Vogue Russia and Vogue France. You’ll be surprised at how different the take of the local editors on fashion trends actually is!

In my introductory post on this subject, I explained some of the hard facts – the differences that drive the need for product adaptation, such as different age structures, different height and body proportions and different ratios of the five body types. All those differences are driving different size specifications if you intend to sell perfectly fitting garments.

Grading tools Photo: Schnitttechnick Hahnau, product adaptation

Grading tools (Photo: Schnitttechnick Hahnau)

Consumer Behaviours and Taste

Consumer behaviours become more and more similar across all countries but there are still differences that might decide the success or failure of an individual brand. And I am not only talking about countries like India or Indonesia which are soooo obviously different, due to historic, social, religious and cultural backgrounds, but also differences just within Europe!

Let’s take the UK and Germany as an example. The majority of female German consumers like their clothing figure hugging and comfortable – but not too tight! This seems to change as well for a certain type of German consumer – although, looking like a tightly stuffed sausage is still commonly bad taste in Germany!

Female UK consumers however, like to show off their bodies. They like their clothes figure hugging, highlighting their body’s assets (boobs, booty, waist and legs). Thus, you have to think not only about the appropriate size specs and label, but also about your fits per body type.

Multi-ethnic Group Photo: nullplus, product adaption

Multi-ethnic group (Photo: nullplus)

Let’s Talk Colours!

If you are from continental Europe doing fashion business in the UK, you will have realised that British consumers have a very special taste when it comes to colours! A mustardy yellow, a dirty petrol and a rusty burgundy are just a few examples. They all go extremely well with the typical English rose complexion of the majority of British people. Italians with their olive toned skin, dark hair and eyes like it red. Bright red. Always! As do Chinese and Russians! White on the other hand is a difficult colour for Indians as it is their colour of grief and sorrow.

Styling Differences

Right now we are facing a massive trend towards more decorated styling. Items with gem stone imitations, studs, metallic prints and colours are becoming increasingly popular. For Italian, Russian or Asian consumers this is nothing new and it perfectly meets their styling preferences. Although the share of consumers who explicitly look for a more clean style is still significantly higher in Germany and Scandinavia, they have not escaped this trend and it has been adopted in those regions too. However all trends go through their natural cycles and in time, there will once again be a more noticeable regional difference between countries. This will then drive a higher demand for product adaptation once again.

I could keep going with numerous examples that prove the need for product adaptation, but to what extent and with what effort remains a separate question. The only general answer I can give without knowing your individual situation is: as much as needed but as little as possible.

Bling Bling conquers Casualwear Collage: Heike Blank

Bling bling conquers casual wear (Collage: Heike Blank)

How to Keep your Assortment in Check?

To help you find an appropriate answer, here is a proven methodology which I have successfully used in previous assignments:

1. Do the Maths!

Analyse your assortment performance to gain a sound understanding of what is working and why. In each company I worked for,  the 80:20 rule was in place, generating 80% of turnover with about 20% of the SKUs. Over time, each assortment grows based on the need to strive for better serving of customers, expanding markets, generating higher average tickets. Surprisingly, not a lot of companies are actively managing the number of SKUs. Thus, cutting 10 – 20% of your SKUs in order to create room for product adaptation for new markets should be easily possible. Define a target SKU productivity (number of pieces sold and/or turnover per SKU) for each of your categories.

2. Integrate the Market Specific Know-How of your Sales Force to Identify Necessary Product Adaptation!

This one however has to come with a few rules. Otherwise you will risk an explosion of your SKUs and/or a significant drop in your SKU productivity.

  • Do not allow vague complaints and inaccurate product requests
  • Use a standard template or even better, a customised feedbacking tool
  • Request precise product briefings with pictures of reference products and a clear description of material, fit, colours and special features

Aggregate feedback to minimise overlaps and maximize SKU productivity. Bright red is a colour which sells not only in Italy but just as well in China and other Asian markets.

3. Make Your Sales Force Accountable

Each country representative has to commit to a sales target per option requested by the sales force. Realistic SKU productivity targets must be set. Finally, investment should be made into development of only those options which will achieve this commitment target. Frequent review and discussion of the success of the briefed items is a must, as is comparison of SKU productivity against its target. Additionally, look at exit margin and average price in comparison to other products, or against the average of the category.

Learnings

There have been some interesting learnings after running this test for a few seasons. We realised that the countries became more cautious before requesting a certain product. But we also realised that the ‘new’ products (briefed to cater to new markets) frequently showed up in the top 10 global best seller lists per category, for 2 simple reasons:

  • The intensive discussion about the product between product management and sales force created greater clarity and
  • The quantified commitment of the sales force to the briefed items, hence their focus on selling those items.

This excellent sales performance of ‘new’ products actually helped the entire company to move forward. With the commitment of the sales force, the product management team became more gutsy in testing a more fashionable, or more edgy product. The tense atmosphere of two opposite parties significantly eased and suddenly the sales force was a lot more supportive of pushing styles that product development wanted to focus on.

Whether you’re going international or growing in your home market, close control of your SKU performance is a key success factor. Product adaptation through simply increasing your SKU count is an easy, but costly solution. Setting the right targets for line extensions will help to prevent exploding costs and complexity.


About the Author 

Heike Blank has worked for big organisations such as VF Europe and s.Oliver but also for niche brands such as Ecko Unltd. and Zoo York in top executive positions. Opening and managing own retail, partner stores, concessions and shop-in-shops in 23 countries in Europe, Middle East and Asia gave her a deep understanding about the importance of a brand-specific balance between customizing and standardizing the business model when conquering a new market. Please feel free to email her for further discussion on these topics. Or for more about her see here.

2 thoughts on “International Expansion: Product Adaptation Without Jeopardising SKU Productivity

  1. Laurent Muckensturm says:

    Great and easy to follow methodology.
    I would add that it also needs to be checked that thesales expected by a product request really are additional sales (at least hit a minimum additional sales to be set) and do not cannibalize sales of a planned inline product.

  2. Heike Blank says:

    Hi Laurent,

    Thanks a lot for your comment! You are absolutely right! It did take us a couple of attempts to find a way how to make this measureable in the fashion business. As majority of the product change with every collection it is difficult to judge whether you cannibalize a potential other product by the new ones requested by our sales force. We did therefore, use the average of SKU-productivity to compare it with the actual performance of the items briefed by the sales force. And yes – you have to set a target productivity and you invest only in those items which achieve the production minimum. But sometimes, you simply can not prevent that this cannibalization happens. As long as the new items help to generate overall incremental sales, everyone was fine with it.
    Let me know your results or experiences should to run a test.
    Have a nice weekend
    Heike

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