British retailers lead the world in multi-channel retailing. Those who crack the formula for providing international customers with a seamless experience have huge opportunities to build profitable multi-channel retailing operations worldwide.
The BRIC countries – Brazil, Russia, India and China – combined represent over 40% of the world’s population, and analysts predict that by 2050 their total economies could eclipse the combined economies of today’s richest countries. Internet penetration is still comparatively low and centred on major cities, but their eCommerce market value already exceeds £69 billion. These countries clearly offer a powerful combination of rapid economic growth and speedily rising internet audiences.
Appetite for British brands in many regions of the world is high, being particularly widely respected and sought after in China and South East Asia. The British government has recently entered into an agreement with Alibaba’s TMall and the online platform Shangpin.com to bring British business into China, where it will provide support and expertise to British brands looking to establish a presence there.
Once regions are identified, which methods should a retailer or brand employ to work out how best to sell in each territory? Ultimately, as for the domestic market, the overall strategy should be to place the customer at the centre of every decision made.
Companies need to assess the “7Psof Internationalisation”: Positioning, Product, Partnership Process, Promotions, People and Platform.
These activities need to be looked at for each market, as with internationalisation comes a fresh new set of multi-channel challenges – commercial, operational, cultural, technical and legal to name a few.
While British retailers want to give international customers the fully connected, convenient experience that omni-channel customers enjoy at home, there needs to be a degree of localisation and customisation. This is necessary to ensure the diverse cultural tastes, shopping behaviour and legal requirements in the international markets are taken into account.
To illustrate such intricacies, there is a perception in China that web prices must be lower than offline. This has certainly been true up until recently and as a result, British retailers need to take the price-sensitive segment into account. In China you have to include platform / revenue channels such as TMall, JD, DangDang and Pai Pai. Also, you cannot assume in a country like China that a brand can be positioned for the entire market. You must position for specific regions or cities as there are huge differences between cities in tiers 1, 2, 3 and 4 in terms of commercial maturity, and even between cities in the same tier in terms of style and shopping experience.
WeChat, the Chinese equivalent of WhatsApp, comes with many commercial applications that do not exist in Western markets. Customers are able to link their WeChat account with their bank account. This means shoppers can use WeChat to scan QR codes and pay with their phones, which makes impulse buyers a great target.
The influence that social media has on purchasing power is unprecedented. In China, 70% of purchases are led by social recommendations or reviews. Customers now also expect rich information about the products they are purchasing.
Looking at the US, this market also requires different positioning and marketing for many parts of the country ranging from the East to the West coasts; acknowledging different lifestyles and trends. With a federated approach to tax, as well as distribution and delivery, the US market presents the same challenges for retailers trying to deliver the best possible customer experience consistently across channels. In the US, as with some markets in Eastern Europe, there is still a strong coupon culture. Customers take comfort from physical forms of promotion, and these will need to form part of an overall promotional strategy across in-store and online.
Russia meanwhile has seen gradual acceptance for multi-channel shopping but faces the huge challenge of logistics. The current carriers struggle across Russia’s nine time zones and are seeing a quarter of deliveries being refused at the door.
Cultural differences will also affect whether UK retailers should follow the same process for both domestic and international operations. In many countries people are far more connected than we are in the UK. On a train in South Korea for instance, it would be difficult to see anyone not using their smartphone. So the immediacy of customer requirements can be challenging. The approach of a business will inevitably differ according to the availability of smart devices in each market.
The need to differentiate, innovate and propagate your business is crucial if you want to succeed in the current climate. Examples of new business models born out of customer-centricity and challenging retail as we know it include own brands moving to marketplaces and selling via other merchants, different brand websites, white labelling, affiliates and flash sales – all of which can be successful for both domestic and international markets.
For each business model, the target segment, ranging and how they reach consumers and deliver goods need to be clarified. It is also important for retailers to understand that upon implementing these business models, they will need to enter a phase of fine-tuning which will entail managing the complexities and organisational change involved.
Many companies opt for their own branded websites selling direct to consumers,and others take the marketplace route for speed – as shown by the number of British brands on TMall in China. A disadvantage is that retailers and brands on TMall all look the same and lack differentiation. Marketplaces demonstrate price sensitivity, which currently characterises the Chinese e-commerce shopper, but this is predicted to gradually give way as the market matures to a more sophisticated multi-channel paradigm based on consumer convenience and rich lifestyle.
Retailers can use both these channels and more to succeed internationally, but the choice used should always be in line with their target market, segment and brand.
Tesco was an early adopter of multiple multi-channel business models in the domestic market, spanning online, catalogues, white label, affiliates, direct and marketplace. It began selling internationally as early as 2002. In South Korea, it recognised the need to partner with a strong local brand, in this case Samsung. Its fashion line F&F also has stand-alone shops in over 20 countries with various franchise partners.
M&S started selling in China on TMall, armed with knowledge of shopping culture and how British brands were perceived in the country.
Even with meticulous planning, challenges still exist in various degrees due to local and cultural differences. One illustration of this is Best Buy, which entered China with a US management approach. It used its own expertise to provide customer support, but soon realised that Chinese consumers preferred to receive information direct from manufacturers. Best Buy has recently decided to exit China, but the point stands.
Internationally speaking, fashion brands Aldo, H&M and Zara have achieved a great deal expanding their store numbers while staying true to the multi-channel vision. However, online only retailers face fewer hurdles in terms of streamlined processes.
The number of international retailers now trading in the UK further highlights the global platform available to reach consumers. Get the model right, there are vast opportunities for growth.