RM/U4 Topic 6 International Retailing
International trade and commerce has existed for centuries and played a very important part in the World History. However International Retailing has been in existence and has gained ground in the past two to three decades. The economic booms in several countries, coupled with globalization have given way to Organizations looking at setting up retailing across borders. The advent of internet and multimedia has further changed the dimensions as far as International Retailing is concerned.
Who are the International Retailers
When you think of International Retailers the names that come to one’s mind would be the Wal-Mart, Gucci, Ralph Lauren, Mango, GAP etc. All of these are International Retailers. However we can broadly classify the International Retailers under two categories. The first category would be the global grocery retailers and the second category belongs to the International fashion Brands.
International Grocery Retailers
The Companies namely Wal-Mart, Carrefour, Metro, Tesco and Ahold etc are the leading international grocery retailers who have multi country presence. Major portion of their total revenue comes from foreign sales. Wal-Mart operates in over 8,500 stores in 15 countries with foreign sales contributing to 18% of its $405,046 billion net sales (2000). Carrefour, a French international retailer has presence in 32 countries with foreign sales amounting to over 48% of its net sales.
These international grocery retailers follow a multi brand and multi product business format which includes all products like food encompassing all types of fresh vegetables, fruits, juices, chocolates etc, fashion and clothing including bed linen etc, grocery, all types of branded consumables, as well as liquor and many more household goods under one roof. They generally follow a format that allows for selling to whole sellers, retailers as well as general public at the mega stores.
Traditionally these International Grocery Retailers have operated mainly in US and in Europe. Specifically in Europe the largest markets have been in Germany, France and UK. With globalisation and with several countries opening their markets to FDI in retail, these Organisations are moving into other parts of the world and into emerging markets.
There is yet another group of International retailers like IKEA, Lego, Toys ‘R’Us etc who have chosen to focus and specialise in a particular segment like furniture etc.
International Fashion Retailing
Names like Ralph Lauren, Gucci, Zara, Hugo Boss, JC Penny, Benetton, Jimmy Choo, Swarovski, Dolce & Gabbana etc belong to the second category of International Fashion Retailers. Originally these Companies catered to domestic markets in the countries of their origin. Fashion and Luxury brands have always been known by their label and brand value across countries, through word of mouth and sought after by the rich and famous from all over. Over the years, these companies have realised the opportunity in expanding their product mix and promoting their brands internationally. Thus we see the emergence of international fashion brands, luxury product brands dealing exclusively with branded clothing including sportswear, casual and formal wear, party wear, foot ware and accessories, luxury items including watches, perfumes, jewellery and many more items of personal use.
In the earlier times, the nova rich and the business class were the main customers who sourced these branded products from abroad. However in the recent times we see the educated and economically empowered youth demanding fashion and going in for branded items. International brands have thus established a niche for themselves in domestic markets aided by the increasing demand for branded fashion products. International grocery retailers have expanded their business in emerging markets by virtue of their investments and procurement strategies.
International Retailing – Features and Challenges
International Retailing and branding has been one of the sectors that is seeing exponential growth. With increase in standard of living and disposable income, people in developing countries are getting exposed to international brands. Rise of internet and multi-media has further provided impetus to the dream of people to aspire for branded consumer goods. Along with the rising awareness and aspirations of the people, the opening up of economies and foreign direct investment opportunities have fuelled the growth of international retailing business.
International Retail business consists of two groups of businesses. The biggest value and volume business happens to be the International Multi brand grocery Retailers like Wal-Mart, Tesco, Metro and Carrefour etc. The second group of international retail business refers to the fashion brands mainly in fashion, luxury brands and personal product category of businesses.
In this topic we aim to explain some of the characteristic features and challenges of the second group of International retail business dealing with fashion and brands. Brands such as Ralph Lauren, Hugo Boss, GAP, Dolce & Gabbana, Gucci, Escada, Armani, Versace, Louis Vuitton and many more are known all over the world and are available at exclusive showrooms in various countries.
In the past two to three decades all these brands have grown to become Global brands, and this has been made possible by their strategic branding, multi product range expansion and innovative merchandising methods.
Though International Retail Companies are Global businesses, the business and products are hugely influenced by the multi cultural and pan country specific product requirements. The product categories largely comprise of fashion clothes, food, gadgets as well as personal and luxury products. Each country and each market is characterised by different fashion trends and consumer behaviour. While the products are fast moving and have very short shelf life, the local culture and outlook has a large part to play in the localisation of the international brands in domestic markets. These global companies therefore are forced to work on global branding as well as local brand promotion and have international as well as domestic-country specific customer reach programs and marketing as well as promotional methods.
International Retail Companies have several inherent challenges that they face in their line of business. Product innovation and product mix happen to be the biggest challenges for these companies both at global as well as country specific domestic levels. The survival and growth of the brand is directly dependent upon these challenges. The global retailers have to be tuned in to the international as well as domestic specific fashion in each of the countries and get their product mix right for each of the markets. Service quality and merchandising methods too, play an important role in the brand visibility and reputation. Pricing of products is yet another challenge faced by the brands. Developing and emerging markets are highly price sensitive. When the international brands are trying to make an entry into the new markets, they have got to have an entry strategy that takes into account the price sensitivity and profitability as well. Procurement and Supplier reliability as well as quality marks one of the challenges that these companies face as they happen to source materials and products from several countries. Quality and reliability as well as in time supplies and logistics is always a challenge that can make or break the business which is highly seasonal in each country. In the recent years we have seen the emergence of ethical practices playing a vital role in the procurement policies of these international companies. The companies have got to ensure that their sourcing partners do not employ child labour or employ unethical methods in manufacturing the products and as principle buyers these companies are held responsible. Ethical buying has gained global visibility and these companies have had to be watchful to ensure compliance or risk unwanted publicity and public outcry.
International retailing business is high volume business. To be a successful international brand, the Companies have got to adapt the right strategies, be aware of the local cultural as well as political environment in the market and more importantly manage the brand promotion and supply chain perfectly. The challenges faced by the business are several but so are the business opportunities.