What is your strategy to achieve minimum-risk overseas expansion?
For Tim Maule, deputy chief executive of Mamas and Papas, selecting the right channel for each market is crucial.
“We started trading around the world five years ago in a small way and now we’re now in 59 countries through a variety of channels – franchising, distribution partners, and trading direct with retail chains. We choose the model that works best in the market, where there is the most potential,” he says.
In China the franchise route has been taken and around 100 stores are scheduled to open. It is the same in Russia where 25 units are planned with its franchise partner in that country. In contrast Maule says franchising is uncommon in the US and so Mamas and Papas supplies direct to retailers including Babies R Us in that market.
WH Smith is further expanding its overseas business in the 20 countries in which it operates with more travel stores planned as well as diversification through a variety of new concepts.
Louis de Bourgoing, international director at WH Smith, told the Retail Bulletin, “Only four years ago the company had a presence in only two countries – India and Denmark – but today it is in 20 countries, predominantly running airport stores. And more are planned as international travel stores are a priority for the business.
“Our market share in the UK is high so it’s logical to go overseas. We start with airports and we’re very flexible, with three models – company-owned stores, joint-ventures and franchise stores – and it depends on the size of the market which we use,” he explains.
Whereas Specsavers constantly develops its overseas businesses by sending individuals out on secondment from its UK base that help maintain the group's brand values and implement the latest initiatives.
It currently operates 1,516 stores with overseas outlets in Australia, New Zealand, and the Nordics and presently there are 22 employees seconded in these countries as well as nine who commute weekly from the UK as well as seven who have decided to relocate full-time in one of these markets.
“We understand what skills they have that can be used in a certain territory. It needs to be right for the market and for the individual. When I went to the Nordics it was to set up a HR function. We’d muddled through with a HR advisory service but it needed to be a proper business partnering function.” commented Mary Jane Seddon, senior manager of reward and policy at Specsavers.
Dr Mark Abell, partner at Bird & Bird, revealed that over the past few years one of the busiest areas for his firm has involved the re-assessment of legal arrangements between UK merchants and their overseas partners.
“Many of these agreements were for 20 to 30 years and some retailers have simply said to their partners: ‘you’ve done a great job with the stores but we’re now opening up shop online.’ The local partners clearly don’t think this is a great idea!” he explains.
On top of this there is the massive obstacle of all markets being very different: “Retail expertise in the UK is not easily transferrable to even Germany let alone places like India, China and Iran.”
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