Janet Hoffman, managing partner of Accenture's retail practice, North America, says that establishing a brand overseas is not for the faint of heart.
CM: What are some of the common mistakes that retailers make when they look to expand globally?
Hoffman: There are probably three things. First of all, they have to be aware that the start-up period is much longer than they traditionally would think it would be. It's much more difficult to get the basic infrastructure established, whether it's payroll, or IT, or HR. There are unique differences within every geography concerning back-office functions that are not core to the business, but they're critical to be able to operate in new environments. So people underestimate the effort associated with that.
Another thing is that they overestimate the power of the brand. They think that the brand will be able to solve many problems, because they do have such great brand recognition.
And probably the third is kind of the reverse of the second, which is that they underestimate the power of the brand once they get into the marketplace. They think that the power of the brand will help make it easy to do business when they first enter, and then they are typically overwhelmed with how successful the brand is once they open the stores. So they are challenged to meet the demand of the consumer because the brand is well recognized and gains momentum.
CM: When you say "infrastructure," are you speaking of bricks and mortar as well as processes?
Hoffman: It's more of the back-office infrastructure, but I would include in that the construction of the bricks and mortar. Whether it's IT, HR, payroll — getting the stores built, getting the office space built.
One of the organizations that we were helping was just amazed that the construction start-up time is probably three times what it is in North America. So it really requires you to rethink your model.
CM: Are these three mistakes common to emerging market expansion as well?
Hoffman: In the emerging markets you have those that I've identified, and in addition to that, you have cultural differences and norms. Some of that's language, which can present a challenge. Part of it is cultural. For instance, if it's a quick-service restaurant or a food retailer, food products can be outside of the cultural norm for the country. There are apparel expectations that may be different based on the cultural norms of the country. So it creates a real need for the retailer to crack the code on how to bring the best of the brand and to connect with the culture and the country in which they're proposing to expand, and really bring those two together.
One of the advantages that we have is that because we are in 47 countries, we have people in those countries and we can bring both our North American expertise and our European, if it's from a European-based organization, to the alternative country, the emerging country, where we have resources that both know the culture as well as know the industry. We can help to speed that up and make it easier for them to evaluate and assimilate some of those differences.
#boxred { width: 335px; margin: 0 95px; padding: 1.5em; text-align:center; } CM: Can you sort of reflect on what paths might sometimes be overlooked as companies look to expand overseas?
Hoffman: Yes. One of the things that is a speed-to-value type of proposition is to first expand your Web site, especially if a company does not already have an international Web site or does not have a Web site in the country in which it proposes to do business, which is what you want to do as part of your entry agenda. A company needs to really understand, How is the customer in China different from the customer in Chicago? The Web site can give you fast speeds of value and understanding.
If there is the business proposition and business case to support kind of the easy entry into, say, the UK, or some of the Latin American countries, that certainly is an option. But I think that where we get further afield — China, and India, and some of the emerging markets — companies should really look at acquisitions.
CM: Just to expand on the Web and retailing, in general, what have retailers learned?
Hoffman: There's data today that shows that many people are going to retailer X's Web site and gathering info, and doing research, and price shopping, and they can, but they don't necessarily buy off of that Web site. So the real issue for the retailer is: How do I convert you once you've come to my site to make a purchase, when you can make a purchase through any number of those channels? If I research it on the Web, do I dial the 1-800 call center number instead of hitting "Click" and put it in my shopping cart? Can I convert that experience on the Web site to get someone to come into the store? Can I serve them through the remote location in the airport? What can I do to convert them from exploration to acquisition by a purchase in any one of my channels.
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