The Retailer Winter_2017/18
Uncertain domestic trading conditions is just one of the factors incentivising British retail firms to explore new opportunities overseas
Sukhjeeven Nat Head of Retail & Wholesale Sector Santander Corporate & Commercial
“The benefits of internationalising and cross border retail include, capturing new revenue, de-risking concentration to the UK market, and offsetting currency fluctuations, as well as enhancing brand values from ‘globalising’.”
FOR BUSINESSES IN THE UK’S RETAIL SECTOR, THE APPEAL OF INTERNATIONAL EXPANSION IS CONSIDERABLE – PARTICULARLY GIVEN THE PREVAILING ECONOMIC CIRCUMSTANCES AT HOME. WHILE THE DOMESTIC TRADING ENVIRONMENT HAS BEEN CHARACTERISED BY TIGHTENING MARGINS OVER RECENT MONTHS, THERE IS NOW A SIGNIFICANT DRIVE FOR FIRMS TO GLOBALISE, NOT ONLY TO TAP INTO NEWMARKETS AND CAPTURE NEW SALES BUT ALSO TO OFFSET CURRENCY FLUCTUATIONS, AND ENHANCE THEIR BRAND’S VALUE. For retailers in particular – especially those in segments such as health & wellness, fashion or lifestyle – globalisation promises further benefits in terms of their profile among consumers. There are several examples of British luxury brands which, having lost their way to some extent in the domestic market, have since managed to regain their status and enhance their price points in the UK on the back of overseas success in countries such as China. However, while larger corporates in the sector have by and large embraced global markets, many organisations in the mid-market have taken a more cautious approach to internationalising and cross-border retail.
lack of understanding of how to go about selling overseas as well as worries over the complexities that may be involved, whether they are dealing in foreign currencies and arranging international payments, or coping with regulations and unfamiliar legal systems. Ensuring product lines are suitable for a chosen market can be another challenge: a number of factors need to be considered, from local purchasing patterns and buying behaviour to cultural issues and expectations of after-sales service. Establishing a reliable and transparent supply chain is also a hugely important issue, given increasing consumer demand for added-value fulfilment services such as next-day delivery and click-and-collect, as well as ethical considerations such as product and process sustainability. At the same time, staffing – whether supporting physical or online sales – remains key to ensuring a positive customer experience, and selecting the right team on the ground is another crucial element of successfully globalising a business. To help companies navigate through these complexities, professional advice and support with ‘in country due diligence’ could help to simplify the whole process. Retailers can access various support, starting from webinars and workshops in the UK to gather information, to in-country visits to help forge connections in new markets. The rise of ecommerce over the last few years, especially in rapidly growing economies such as China and India, presents a fantastic opportunity for UK retailers, including those firms which are perhaps not ready to commit to a physical presence in their target market. The benefits of internationalising and cross border retail include, capturing new revenue, de-risking concentration to the UK market, and offsetting currency fluctuations, as well as enhancing brand values from ‘globalising’. The ecommerce route enables companies to dip their toe in the water, testing how their products perform with a particular group of consumers or in a certain market: using an established ecommerce platform means they can sidestep issues such as setting up payment channels, while also getting assistance in dealing with local customs or product regulations.
Such an approach could be a precursor to establishing a physical presence in the target market. In sectors such as fashion, for example, an omnichannel strategy, with physical stores as well as online, is often seen as the most effective way of mitigating the supply-chain risk that comes with having a relatively high level of returns. Smaller, mid-market retailers can also take advantage of their agility to enter foreign markets in a way that minimises their risk: for example, they may choose to start by introducing a limited number of product lines which are tailored to local consumers. Depending on the success of their initial efforts, they can then move quickly to change their strategy or expand their offering in a way that a large corporate may find particularly challenging. The question British retailers should ask themselves is: can I afford to miss out on these opportunities? As the UK is impacted by a weaker pound, for example, retailers have the chance to diversify their markets. Another important factor is the change in global consumer attitudes: a potential customer in Dubai searching for luxury goods is likely to find sellers all over the world. There is far more transparency today in terms of pricing and the availability of products that consumers expect to have access to retailers regardless of where they are based. With billions of pounds in international revenues available to businesses which can make their products available conveniently, at the right price, and with a personalised and rewarding customer experience, now is the time for retailers to broaden their horizons.
SUKHJEEVEN NAT // +44 (0) 7568 112 445 // email@example.com // linkedin.com/in/sukhnat // santandercb.co.uk
Under normal circumstances, when presented with an opportunity to grow their business, most companies would seize the chance. But when it comes to international trade, there is something of a fear factor at play: this is the result, at least in part, of a general
32 | Winter 2017-2018 |
retailer | Winter 2017-2018 | 33
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