Overseas expansion - tips for smaller fashion retailers
During this these challenging times for UK fashion retailers, some smaller companies may be considering extending their operations overseas. To those without experience the prospect of expanding overseas can seem daunting but if done well it can bring great rewards. By Marlena Woolford.
Nick Robertson, the founder of ASOS, told Drapers that "97% of the opportunity for ASOS lies outside of the UK". Here I give my own recommendations that can contribute to the success of international expansion.
This is one of the biggest challenges. On the one hand you want to be able to manufacture on a large scale and maintain your brand identity, on the other each market has its own specific rules and preferences. Some companies simply send the whole collection to all shops internationally while others with their own brand and international retail network introduce the core of their collection internationally and allow local shops/operations to decide about the remaining orders. In some locations companies might decide to employ local designers to specially edit the collection for the local market.
It is important to remember that it is not just the style that matters. The success of the sales operation may also depend significantly on the size and shape used as the figure of an average person may differ from country to country. For example on average people in Japan or Thailand are smaller, the male foot in Russia tends to be wider, Norwegians are usually tall, in some countries men over 30/40 are quite “round” etc. It sounds obvious but potential customers, even if they love the style, won’t buy an item of clothing if it doesn’t fit. Getting the size and shape right is therefore crucial. What’s more, sometimes we also have to take into consideration local superstitions or customs, for example in terms of colour or print. In some countries deep violet is the colour of death and with superstitious customers there is no point in using it for party wear!
Building a team
Choosing the right people to work with is key. Perhaps the easiest option is to take someone that already works for your company or to recruit someone in the UK specifically to undertake the role. This can work especially well if you are able to find someone that has experience or a background in the country into which you are expanding. Such an approach tends to work best if the team member is able to spend a period of time, usually at least 1-3 months, in the relevant country and continue travelling there on an occasional basis afterwards.
An alternative is to employ a local who is based in the country into which you are expnding. This can be cheaper but can be risky in that they may not fully understand what your company stands for, how it operates or how to work best with your team. There will also be some communication barriers. If you do choose only to have a local person in charge of your expansion, it is worth ensuring they are able to spend sufficient time working in your HQ so that they get to know the culture of your company as well as your domestic team. If possible consider employing someone that has successfully introduced another brand locally.
The ideal solution may be a combination of both, utilising someone from your company (ideally someone with international experience even if not for your company) in conjunction with a locally recruited person or company, preferably one that has experience of working with thoe in other countries. If the operation is large enough and you employ someone from your company abroad it can be helpful to have an additional role in the UK that will act as the point of contact in the UK and will co-ordinate the project from HQ.
Operations, strategy and administration
When expanding abroad and particularly when getting quotes for something it is important to check all aspects of the arrangement, not least whether there are any hidden charges or regulations that will limit your operations, especially those that may not exist in your country. This can be particularly important when negotiating retail rents.
It will be necessary to recruit a good local legal company or a British legal company with offices locally and that specialises in local and international law. Getting everything right from the start will help to protect you from any problems and resulting costs down the line.
If your company strategy allows and if it fits in with your other plans, you can consider entering the market though wholesale operations. This can be a good testing ground without taking on too much risk. Alternatively you may decide to start with a franchise arrangement. However, you will need to think carefully about who and how the franchise can act on your company’s behalf.
Remember that expanding abroad may bring currency risk. It may be worth considering help from a forex trading company, especially when large amounts are at stake in which case it would be worth hedging your currency risk. It is often useful to consult an accountant or finance specialist with experience of working with companies with a presence in different geographical markets. They can help you to find the best ways of accounting tailored to your business needs. Companies I worked for tended to fix their currency exchange each year for accounting and financial purposes. Alternatively you may opt to rely on a flexible currency exchange converted according to the exchange rate on the day. Though more accurate a disadvantage of such an approach is that it is likely to be much more time consuming as well as carrying more uncertainty.
When we deal with people where English is not their mother tongue, we have a higher risk misunderstandings due to cultural differences, even if the person concerned is fluent in English. The first point to remember is not to get offended by the tone in which the message is conveyed. Secondly it is often helpful to summarise what you have discussed or heard in your own words and then double check it. Thirdly, if you need to have an interpreter it is worth considering hiring a professional and if possible someone that has worked in the industry. If you ask your partner or employee to translate, take care not to burden them with any other job while translating. Translation is very intense and demanding work and it is extremely difficult to concentrate at the same time on translation and on participating in a discussion or undertaking some additional tasks. Many people that do not speak foreign languages do not realise the difference between speaking a language and being able to translate. These are two very different skills!
Local vs global
Having an international business raises the question of how much of your business should be run globally and how much locally. Usually the best answer lies in a combination of both. For example, you can have a global concept with elements that can be easily adopted locally. In VM it can be done through a global concept of shops that incorporate local elements such as local celebrities, old pictures of the country/city in which the shop is based etc.
Learn from the success of others
It is worth searching for countries or areas where the values of your brand fit with the local society. LV is a great example of a company that exploited its brand identity in Asia where customers respond well to products that are associated with affluence. Moreover, international operations are part of their heritage as a brand connected with travel. Zara is another great example of a company that understands how to adjust its operations to fit with the markets in which it operates.
MaxMara managed to enter Polish market with its promise of luxury, but at prices affordable for the local market. SHANG-XIA is the expansion of the Hermes Group into China, its mission is to create a 21st century lifestyle founded on the finest traditions of Chinese design. It represents a very clever way of incorporating the values of the main brand with a special sub-brand, especially developed for China, based on the traditions of the local market.
And last, but not least, don’t be afraid to be the first or one of the first entrants to the market. Of course you need to assess the situation carefully before making the leap and being the first entrant is more difficult and requires more flexibility. However, the rewards of being a first mover can be significant. For example, after the collapse of the iron curtain many French and German companies decided to enter these new markets quickly and now many of them have the majority share in some Eastern European markets. At the same time a number of British companies hesitated and as a result have often struggled to build market share. The message is clear: be brave and, if you think it can work, go for it!
Marlena Woolford is managing director of Inspiration Trend Analysis and a former Regional Manager for Central and Eastern Europe at WGSN.
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