Think local and act global

As unprecedented change sweeps the global retail industry, Australian retailers need more than a wing and a prayer to crack markets overseas.

It’s no secret that the roll out by Wesfarmers of its Bunnings Warehouse brand into Britain and Ireland is floundering.

With anxious shareholders expecting the two-year-old international operation to make a half-year $165 million loss, there is speculation the pin could be pulled on the venture.

It begs the question: if Australia’s biggest company can’t turn a profit exporting one of its home-grown retail icons, is overseas expansion just too hard and the risks too great?

Wesfarmers has been honest about the “self-induced” problems it faces with Bunnings in the UK, which basically boil down to badly misjudging the local do-it-yourself home improvement market.

It’s a bitter pill to swallow after fending off the Masters Home Improvement chain – a strategy that was conceived by Woolworths and US hardware giant Lowes to undermine Bunnings in Australia.


Should we or shouldn’t we?


Some companies such as consumer electronics giant JB Hi-Fi have simply decided not to take their business model overseas, but as a result of that decision JB Hi-Fi now has to defend the domestic market against the incursion of global player Amazon.

But its focus in Australia so far has made it one of the 250 largest retailers in the world, according to Deloitte.

Further, it would be wrong to say that all Australian retailers come off second-best when they expand overseas.

“In 2016, we started to see more Australian retailers expand their operations into the US, Europe and Asia-Pacific, but the numbers are still relatively small,” says David White, leader of Deloitte Australia’s National Retail Industry Group.

“With competition in the domestic market threatening saturation in certain categories, we expect to see more Australian retailers take a leap of faith into overseas markets.”

READ: Tips for expanding into Southeast Asia


International success stories


Aussie chicken franchise Oporto, for example, is expanding beyond its current New Zealand overseas network with the opening of its first store in Singapore in mid-April, followed by Sri Lanka later in the year and then possibly the Middle East.

Another franchise chain, Beaumont Tiles, has flagged intent to take its brand offshore, pinpointing Asia and the US as potential new markets.

Both franchises will be following a trail set by the likes of Geelong-founded retailer Cotton On Group, which now has more than 1400 clothing stores across 18 countries, and Australian women’s fitness label Lorna Jane, which has outlets in the US and stockists in regions as far-flung as Europe, the UK, Africa and Asia.

Meanwhile, Premier Investments, with high-profile brands such as Just Jeans and Portmans, is continuing to make in-roads in New Zealand, while Gold Coast-headquartered beauty business Cherry Blooms has penetrated the lucrative US market by distributing through established, upmarket department store chains such as Nordstrom.

As founder Jellaine Dee notes, having Cherry Blooms’ mascara selected for inclusion in both the Golden Globes and Academy Awards gift bags was a great fillip to her plans for international growth.

Meanwhile, stationery and gifts brand Typo launched internationally on the back of strong online sales in the UK, along with Kikki.k, which has stores in New Zealand and Southeast Asia. Likewise, vitamin supplement firm Blackmores is performing well in Asia.


Do your homework 


For all companies keen to expand overseas, developing the right short- and long-term strategies, distribution systems and processes is paramount.

It’s important to understand the local culture, market to relevant customer touch points and ensure first-rate merchandising.

Staff development is one of the keys to strong sales growth, as is ability to accurately forecast demand.

With too little stock, growth opportunities can go begging, but with too much, forced markdowns will hurt profitability.


Foundations for the future


There are also other key issues to take on board, as Deloitte’s new report emphasises.

Successful retailers across the globe are rapidly adapting to the fact that, from the consumer perspective, shopping is not about bricks versus clicks or one channel versus another.

Instead, consumers are channel-agnostic, so combining bricks with clicks is essential, particularly in mature markets. That means physical stores aren’t going away.

In fact, 90 percent of worldwide retail sales are still done in bricks-and-mortar stores. But to compete with the convenience and endless aisle assortment offered online, meaningful customer experiences and brand engagement is crucial.

“It is a transformative time in retail,” says Deloitte Global Retail Sector leader, Vicky Eng.

“Across the industry, disruption of traditional business models has given way to unprecedented and transformative change – change required online and offline to better serve more demanding shoppers and redefining customer experience.”