Tristan Rogers is the CEO of Concrete, a global enterprise collaboration used by leading international brands including M&S, Levi’s, Debenhams and Tesco F&F. Here, he writes about the strategic measures retailers should take before expanding overseas.
International expansion has long been a popular route for retailers that already have a well-established presence in their home country, but want to replicate that success in new markets.
In the lingerie market, brands such as Victoria’s Secret, Intimissimi and Agent Provocateur are now well-known names across the globe thanks to successful expansion into a number of countries.
Agent Provocateur has 88 stores around the world, including stores in Milan, Hong Kong and Sydney. Likewise, Victoria’s Secret, supported by its parent company L Brands Inc, has launched five stores in the UK since 2012, and opened its first four stores in the Middle East last year through a franchise agreement.
Best route to market
With the Western economy still in stasis, it is perhaps no surprise that popular retailers are pursuing this kind of strategy. In the current market, international expansion should be mandatory for any brand with a degree of maturity in its domestic market. This is fast becoming the new norm for brand strategy, and we are seeing it being employed by more and more successful luxury brands, including lingerie retailers.
As for route to market, franchising is proving an increasingly popular commercial model for these luxury retailers seeking an international presence. However, even though this is a viable strategy, lingerie retailers will still need to protect the very essence of what they have created – their brand promise – and this must be consistent in everything they do, including everything their customer sees and touches, and their entire go-to market strategy, whichever country they may be in. As such, close attention needs to be paid to consistency in branding, store layout, marketing collateral and more.
Asia, the Middle East and Eastern Europe are three key markets that luxury lingerie retailers are choosing to enter at the moment. However, retailers need to be aware that this strategy can often create a lot of distance, both geographically and culturally, between head office and the store, which means that monitoring day-to-day brand performance can’t be achieved by popping down the shop to see how it’s doing.
As such, before committing to entering any new markets, lingerie retailers should ensure they have the processes, checks and balances in place to make sure that these great brands will also be great international businesses.
First – and most crucially – demand needs to be established and servicing that demand inefficiently is preferable to spending money on an efficient supply chain in a market where there is no demand. If a retailer knows how much demand it can expect from key markets, it can build distribution channels accordingly.
However, in order to do that, retailers need to get to the point where there is suitable demand. They have to start with their internal processes, making teams work better together and getting better data back from market more quickly. Then, and only then, can they adjust their supply and distribution channels with confidence.
Once they are established, new markets need to move to a ‘push model’ of product supply very quickly, meaning that a HQ needs a regular and accurate account of what is selling and where. This kind of data is the lifeblood of knowing what works, and is essential for driving supply into the market effectively. Typically, however, most retail brands lack the granular visibility and timeliness of overseas market data and, as a result, they are not in a position to drive profitable product selection and underpin market demand. All of these issues must considered very carefully before retailers enter into international expansion.
International expansion isn’t a trend that shows any signs of slowing, and we should expect to see more luxury retailers and designers announcing similar ambitions in the coming months. Furthermore, high street fashion brands are rapidly moving into intimates, including Topshop, H&M and Mango – all of which already have a well established international presence.
In order to stay competitive, specialist lingerie retailers will therefore need to ensure that they are operating an efficient, multichannel function in the same markets as their high street counterparts. Whilst international expansion will always incur some challenges, the true cost of global sourcing for a global market is ultimately a cost worth paying for long-term success.