Retailers Going Global: Dodging The Seven Deadly Sins
Date: September 16, 2019
By Shelagh Stoneham, Getting to Global Contributing Author.
Many brands that are well-entrenched in a saturated and mature retail market are increasingly looking to maintain growth by moving beyond their borders. Improved systems and software are making cross border eCommerce easier than ever before, however, many retailers feel that to build a truly immersive brand experience in a new market, a bricks and mortar presence is also essential. The stakes are high, but so too can be the rewards.
Canada, for example, a notoriously attractive, but difficult market for retailers to enter successfully, has recently experienced many new entrants. ‘About 30 international brands entered Canada in 2018 by opening standalone stores — that’s down a bit down from a record-breaking 2017 when more than 50 international brands entered the country. https://www.retail-insider.com/retail-insider/2019/2/list-of-international-retailers-that-entered-canada-in-2018-feature. Many retailers such as Sephora have been incredibly successful, others have experienced highly public failures (e.g. Target who closed all 133 stores within two years of launch). Avoiding one or more of the following common mistakes can mean the difference between brand success and brand failure for a new global market entry.
Sin#1: Global Brand. No Local Strategy. (aka Doing Your Homework)
Every global retailer entering a new market needs a comprehensive business plan that reflects their deep understanding of the local market and how their brand will serve an unmet need. This includes: market trends, key competitors, vendors, market dynamics, cultural and environmental nuances, government and industry regulations and a perspective on how the brand will maintain its’ unique essence but still show respect and relevance for the local market.
A cautionary tale comes from Starbucks. “The coffee giant opened their first Australian store in 2000 and quickly grew to 84 stores across the country. Eight years later, Starbucks had to close 60 stores with losses of over 140 million dollars. One of the main reasons for this disastrous outcome was Starbucks’s inability to properly analyze their local competition: McDonald’s (McCafé) and Gloria Jeans were already well-established and had a better price compared to Starbucks. They were also better adapted to consumer’s coffee preferences” https://www.textmaster.com/blog/5-mistakes-going-global/
Sin #2: Cultural Myopia
Language translation is obviously one of the first steps in adapting to a foreign market. It is surprising to be me how often sloppy translation goes unnoticed or at least uncorrected. Others convert only part of the language on their websites into the local language. This suggests arrogance and demonstrates how little respect a brand has for its new market. And perhaps even more egregious is not understanding what may be a technically proper translation, can also be culturally offensive. For example, ‘When you’re globalizing a brand, it’s always a good idea to check whether your name, logo, or tag line means something different in the regions where you’re expanding. Coors translated its slogan, “Turn It Loose,” into Spanish, where it is a colloquial term for having diarrhea.’ https://www.inc.com/geoffrey-james/the-20-worst-brand-translations-of-all-time.html. “Have a Coke and a smile” famously became “Have a Coke and a mouse” some years ago.
Sin#3: Standard Menus/Product Assortment
Brands that are wildly successful in one market may translate well from a positioning perspective to another, but not without the support of highly relevant product. Knowing market climate, customs and customer sensibilities helps retailers determine what part of their assortment is most relevant and what veto eliminators need to be addressed.
For example, when I was an international executive at Taco Bell many years ago, we built a very successful global business. Core menu items were mandatory in every location but there were other products that were identified as both unique and important to be added as deemed by local experts. For example, french fries (chips) are a price of entry for Canadian QSRs so we added them to the Canadian menu.
Sin #4: Not Leveraging Local Expertise in Key Decision-Making
Marketing research is usually very important input but without local expertise, the interpretation of the data can be misleading. Marketing communications that deliver the brand messaging in a compelling manner and securing the perfect location at a fair price etc. are all potential landmines that could blow-up projections. Having an experienced local team in place with an in-market brand decision-maker is key to avoiding missteps. Case in point, Gwyneth Paltrow’s first Goop store launched in Toronto recently but was forced to removed key products from shelf as they were improperly labelled for the Canadian market. https://www.cbc.ca/news/business/health-canada-goop-natural-health-products-1.5167702
Sin #5: Mediocre Bricks & Mortar Flagship
First impressions count, especially when you are competing in the aggressive retail landscape. Brands that don’t build a compelling store offering that truly expresses their unique brand essence is a missed opportunity. So too are those that don’t invest the time and money to secure a quality location. Lululemon is an example of a retailer that creates beautiful consistent brand environments while leveraging the unique architecture of the building to make each location special. They also often test the viability of a new location via a pop-up before committing to a long-term lease.
Sin #6: Megalomania
New market expansion is tough. Leaders thinking it will be relatively easy based on brand strength in another region often fall. An infamous example of that was Target’s entry into Canada. Target held high-brand awareness and affinity with Canadian/U.S. cross-border shoppers. With careful planning and execution, it should have been an incredible success story. Unfortunately, it became a case-study in what-not-to-do. 133 stores opened and then closed within 681 days. The reasons cited why Target failed miserably include: Target’s Canadian stores had higher prices and lacked the same selection of products as Target U.S. stores, supply chain issues led to many empty shelves; they underestimated competitors such as Wal-Mart Stores which quickly moved to cut prices, expand their offerings and open new stores and Target’s lack of online shopping. On top of this there was an overriding arrogance in head office of “we know better”. https://www.theglobeandmail.com/report-on-business/missing-the-mark-5-reasons-why-target-failed-in-canad/article22459819/
Sin #7: Unrealistic Expectations
Many brands go global with unrealistic market contribution expectations. Their return on investment time-horizon is absurdly short. ‘In an analysis of 20,000 companies in 30 countries, we found that companies selling abroad had an average Return on Assets (ROA) of minus 1% for as long as five years after their move. It takes 10 years to reach a modest +1% and only 40% of companies report more than 3%.’ https://hbr.org/2015/03/few-companies-actually-succeed-at-going-global.
In today’s retail environment it is even more important that if you want to expand globally, you need to act locally.
About the Author: Shelagh Stoneham is a marketing and branding expert. She is an international keynote speaker and retail strategic growth advisor. She has served as the Chief Marketing Officer for several Fortune 500 companies in North America. Shelagh serves as a Board Director of the Global Retail Marketing Association (GRMA)