By Bruce Dybvad
2013 finds international retail hitting its stride, expanding at full speed in the largest developing markets while staging entries into smaller countries around the world. In mature markets, the industry is making the most of new realities through efficiencies informed by consumer insights.
RIDING THE WAVE OF THE GLOBAL SHOPPING BOOM
In the past five years, the world’s leading retail brands—U.K.’s Tesco, German giant Metro, America’s Walmart and France-based Carrefour—grew their revenues 2.5 times faster in developing countries than in their home markets. Now more than ever, international expansion is the name of the game.
For the most part, brands are well poised to take advantage of this opportunity. The arc of their evolution has taken them through boom, bust and digital revolution, leaving them wiser, more agile, more in tune with consumers and ready to take on new markets.
Like many international big box mass merchants, Carrefour has learned to make its brand concept work in various formats. Hypermarkets and supermarkets still prevail, but close-to-home convenience cash-and-carries—popular from Brazil to the United Arab Emirates—are growing quickly, along with e-commerce integration. Concepts are targeted to specific segments in local markets for precise consumer needs and occasions, and include formats as small as kiosks and vending machines. Such storefronts also act as low-cost billboards in busy metropolitan areas.
Technology continues to transform retail in new markets. Consumer expectations and behaviors have been altered by access to the internet, as well as the prevailing economic climate. Spain’s Zara only recently expanded online in key markets to great success, long after establishing a brick and mortar presence in almost 80 countries. Today, however, expansion without a multi-channel strategy might be foolhardy. Growth in e-commerce and mobile commerce currently outpaces physical retail in countries large and small.
Retail is no stranger to risk and new markets present varying levels of it. To navigate complex cultural and regulatory issues, brands look to joint ventures with local partners, as in the case of LVMH in India, and Walmart in Brazil. For U.S. fashion brand J.Crew, that approach resulted in loss of brand control; it has since abandoned a key partnership and temporarily exited the Tokyo market. In some cases, the outright purchase of a controlling interest in an established like-minded local company offers a better chance of success. Expansion opportunities may appear endless, but they’re certainly not effortless.
"Mobile touchpoints can either inspire loyalty by engaging consumers on a deeper level, or destroy it by offering too many options. It pays to study consumer behavior in each market."
THE BURGEONING MIDDLE CLASS
Commerce is powerful, yet it’s nothing without a strong middle and aspiring lower class with disposable income. Studies predict that in little more than a decade, more than half the world’s population will have joined the consuming classes. Emerging markets will account for nearly 50 percent of the world’s total consumption, up from 32 percent today. China and India will account for two-thirds of the expansion.
Thanks again to the internet, consumers around the world are well-aware of today’s leading international brands and follow Western trends. In many cases, they have sought out such brands, are comfortable with e-commerce and mobile commerce and are often willing to endure lengthy delivery times.
However, global brand awareness does not guarantee loyalty. In China, for example, price sensitivity and an attraction to value offerings may leave a brand wide open to competition. Mobile touchpoints can either inspire loyalty by engaging consumers on a deeper level, or destroy it by offering too many options. It pays to study consumer behavior in each market.
Chinese consumers may be price-sensitive, but they are also the world’s largest luxury goods market with 12 billion USD in sales and growing. In Mongolia, wealth, stability and democracy have created a consumer base for the likes of Zegna, Cartier, L’Occitane and Burberry.
Some things haven’t been changed by technology. Word of mouth carries great weight in emerging markets where families and friends live in close proximity. Immense pressure is on brands to get things right the first time—location, price, convenience, assortment, service—and keep the bloom on the rose until they can begin to build brand equity and market share according to local needs. And one of those needs might be additional product information, since the in-store phase of the consumer decision journey tends to be longer in emerging markets where shoppers visit multiple stores multiple times to collect buying details.
Emerging consumers around the world do share common ground, however. Studies show that across cultures they are concerned with value and how well a need is met. Luckily, those are things that brand-led companies do best.
"Growth in the next 3 to 5 years will come from store types that are fundamentally different than those of the past. In the meantime, around the globe, the foundation of a retailer’s success lies in how well its touchpoints enable shoppers to know it, love it and successfully interact with its brand "
UNREALIZED POTENTIAL IN DOMESTIC SHOPPING EXPERIENCE
Much has been said about the soft U.S. economy and the struggling Eurozone, but too little about the potential in those markets. There is considerable opportunity, from a brand point-of-view, to fatten margins through innovation that gets the most out of the existing store base. There’s room to edit assortments, optimize space, evaluate categories, trim fleets, maximize the return on advertising and enrich the shopping experience.
The basic layouts of mass merchants, grocery and drugstores, for example, have remained stagnant for decades. Today, key shopping zones are in flux under the influence of brands such as U.S. grocery giant Kroger. The front end, once defined by a narrow checkout aisle, is now considered an area for experience creation. Impulse zones disrupt the shopper experience in positive ways. Seasonal areas serve as centerpieces for brand stories. Digital integration throughout provides shoppers with inspiration and promotional stories.
Albert Heijn, the largest supermarket in the Netherlands, set the Eurozone standard for mobile apps. Its app lets you create a shopping list, shows you the easiest route through the store to fill it, acts as a product scanner, locates stores and connects to Heijn’s website—it even suggests recipes.
In its home market in Korea, W-store pharmacies leverage design to stand out from the non-differentiated white-and-green competition. Its innovative courage has resulted in a cozy, café-like pharmacy. The feel-good experience gives shoppers more reason to attach to the brand and increases their perception of its value.
Growth in the next 3 to 5 years will come from store types that are fundamentally different than those of the past. In the meantime, around the globe, the foundation of a retailer’s success lies in how well its touchpoints enable shoppers to know it, love it and successfully interact with its brand.