The days, when brands could establish a successful retail format at home and just roll it out internationally without major adaptations, are long over.
Customer centricity is the new holy grail in the retail business, promising prosperity and success for any retail format. Surprisingly, many brands still start to roll-out a retail format without even trying to understand whether and how consumers and their behaviors differ in a new market. This post illustrates what to explore and adapt to establish a successful retail format when going international.
Store Location and Adjacencies – Where Are Your Target Consumers Shopping?
- Shopping centers vs. high street, 1b/2a-locations with development potential in your home market vs. 1a locations in new markets
- Shopping centers accessible via public transport or by car only (which is surprisingly often the case in emerging markets)
These questions need to be explored in detail in order to understand who is shopping there and how often. How big is the share of window shoppers vs. real shoppers spending money?
When it comes to international expansion, particularly young and edgy brands tend to overestimate their dependency on a cool non-mainstream location to attract their target consumer. Looking for the next up-and-coming location in Western European cities is its own kind of treasure hunt for these brands. But this does not work in most international markets, as they do not have the same type of high street locations. Especially in developing countries or countries with climatic challenges (such as high temperatures or frequent seasonal rain fall) the main reason for visiting a shopping mall is spending leisure time with friends while escaping extreme weather rather than shopping.
Exploring the cultural and culinary offer reveals a great deal about who is frequenting the mall and gives you a first impression of the ratio of qualitative to quantitative footfall. Be cautious with footfall statistics provided by mall owners and other sources; the footfall may look huge, but your conversion rate risks reaching all-time lows!
Adjacencies which ensure that you benefit from relevant footfall of neighboring stores may differ substantially between markets. In many emerging markets, you will find a colorful mix of brands from all over the world alongside local brands that you have never heard of, but that may resonate well with your target consumers.
Selecting the optimal location, especially in a new market, is both one of the most difficult and most important decisions you will have to make – one that may well be decisive for the success or failure of your entire roll out.
Here is what you can do to get a realistic point of view:
- Go to the targeted location,
- Count and observe consumers at different points of time (busy vs. quiet days/hours),
- Understand seasonal dynamics (climate, public and religious holidays, other events, working days and hours)
- Evaluate the share of consumers relevant for your brand,
- Evaluate the share of real shoppers vs. window shoppers and
- Observe the number of shopping bags!
Assortment and Product Mix – What Is Your Target Consumer Looking For?
I have touched on this subject in one of my previous posts about international expansion (see here). Trends, particularly fashion trends, are becoming increasingly global. Often, however, the timing of a trend becoming economically effective still varies between markets. Consumer behaviors, too, become more and more similar across countries. But there are, and always will be, country specific differences that might decide success or failure of an individual brand and its retail format. To mention a few:
- seasonal/climatic differences,
- color preferences (based on complexion and hair color) and historic or cultural meanings,
- age structure of the population (very young in Asia vs. very old in Western Europe)
- corresponding ratio of body proportions and body types,
- preferences in fit, styling, detailing.
For your retail format, this means that you have to make careful decisions about the consumer’s journey through your store.
What are the segments and products you are using as a teaser to seduce consumers to check out your store? These might be different to those working in your home market (more fashion, decorated vs. sleek styles, sexy vs. relaxed/casual items, entry price points vs. mid price items, bold colors vs. muted colors, …). You may need to rethink and significantly change your product segmentation (male vs. female, tops vs. bottoms, fashion vs. basic assortment, NOS vs. seasonal styles, price ranges, …) and space allocation compared to your home market.
Store Size, Dimensions and Layout – What Space Do You Need to Make Consumers Experience the Brand?
Your decisions about assortment and product mix will have an effect on size and dimensions of your retail format. Even after taking a fair share of the above-mentioned product-relevant differences into account, your store size should not exceed 70-80% of your well-tested home retail format. With a little luck, this will correspond to the share of your assortment that is relevant to consumers in the new market.
Many brands start with oversized stores considering their given turnover potential in a new market. Among the main reasons are logistic issues, such as replenishment volume and frequency and corresponding stock room needs. The resulting inflation of non-productive but costly space strains your store P&L. This will need special consideration when evaluating your 4-Wall contribution. Remember to also consider differing legal requirements regarding back office, staff toilets and break rooms.
Do not compromise in terms of store layouts. Your retail format may work with an L-shape, multiple floors or a small store front in your home market, but that doesn’t mean it will in international markets!
A lot depends on brand awareness and brand desirability in your home market compared to new markets. There are generally two ways to address this:
- Either spend a lot of money and brainpower in developing an outstanding marketing concept to promote the new store
- or start rather small with an ideal box and ideal fascia and test, learn and adapt it before you start the roll out!
Store Look and Feel – What Do You Want Consumers to Feel in Your Store?
Far distance visibility of fascia and windows are key to let consumers know what to expect in your store. At the same time, you want to make them curious and seduce them to enter the store.
Depending on shopping frequency and location quality you will need to decide on how often to redress the window. In the Middle East, in China, Japan and other Far East countries, consumers are used to inspiring, outstanding windows changing weekly or bi-weekly. This means you may need to double or triple your investment compared to your home market.
You are used to starting your consumer flow on the right side? Well, that works in most but not in all markets. What can you do to find out whether this works in the target market as well? Ask someone who knows or, even better, visit a target location and observe consumers for yourself.
Store design is a matter of intense debate. Everyone has an opinion, and the majority of the discussion revolves around esthetics or taste. But here is what you really need to understand when it comes to international expansion:
- The cultural relevance of your brand as expressed by the means of your store design matters. What works at home may or may not work in international markets and depends on what else you do to tell your brand story (social media, marketing, events, promotions). Distressed fixtures or an industrial look and feel can have a blue collar appeal and be regarded cheap and ugly in some markets.
- The flexibility of your wall and mid-shop fixtures is even more important if you want to use your first stores as pilots. Beginning to understand a market means to test, evaluate, adapt and test again. A flexible fixture layout and set-up is crucial.
- Your fixtures should allow fast and easy transformation of your store’s look and feel. Consumers in markets such as China, Japan or the Middle East expect excitement and elements of surprise every time they visit.
- The functionality of fixtures needs to be verified. Asian consumers are on average up to 15cm smaller than European consumers. Forget the 1.4m rule for the max. height of mid-shop fixtures, it won’t work if people are on average 1.5m. Top level product placement needs to be lower, eye levels are different, and eye level signage has to be placed differently.
Yes, it is costly and yes, it requires time and management attention. But investing in understanding the specifics of a market and its consumers, and thus taking a fact-based decision on what to adjust and what to stick to will definitely pay off. Don’t get me wrong, international consumers expect the same brand experience as they might experience in your home market. What that means, however, may differ from country to country. And don’t forget: more brands fail in new markets than succeed. Make sure you belong to the successful ones!
In Part II (following September 7th) I will share some thoughts and experiences about the customer journey, staff, customer service and more. Subscribe to the blog to make sure you don’t miss it!
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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, the Middle East and Asia gave her a deep understanding of the importance of a brand specific balance between customising and standardising the business model when conquering a new market. Please feel free to email her for further discussion of these topics. Or for more about her see here.