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Are you looking to deliver sustainable growth? The current climate and inflationary pressures continue to trouble the retail industry as rumors of a recession loom over many global markets. According to McKinsey & Co. 97% of fashion executives expect their cost of goods sold as well as selling, general and administrative expenses to rise in 2023, spurring appetite across the industry to simplify assortment planning and manage costs. So the question is, how can you expand internationally profitably and efficiently?
We looked into the steps of the strategies global retailers are adopting in international expansion. We also had input from our retail strategists on their suggestions when clients seek similar advice on international expansion strategies and how data analytics is helping accelerate manual processes. Here are the four key ideas to consider in your expansion strategies.
Leading retailers are increasingly adopting international expansion to achieve organizational growth objectives. However, without thorough research and understanding of foreign markets, investment mistakes are easy to make. It’s critical for retailers and brands with international expansion plans to know the local competition, pricing and consumer.
Begin with a base knowledge of both local competitors in the market and global competitors that align with your brand and target audience. When looking at global expansion or into new territories you may not possess the local resources or time to manually conduct endless hours of research. This is where global market data insights can help. Consider a retail analytics platform where data is pre-prepared and insights automatically authored that can help you make informed decisions with data to back up your theories.
When entering new target markets for your international expansion strategy, successful retailers carefully align their assortment planning to appeal to local customers. Discover more about how to localize your assortment here. As you consider entering new target markets, you need to carefully align your assortments to local customers. Customer centricity recognizes that not all customers are created equal as explained in depth by EDITED’s own Michael Ross, EDITED’s Chief Retail Scientist. You particularly want to identify early high-value and high potential value customers to optimize your margins.
Abercrombie & Fitch Co., a global lifestyle retailer originates from America and continues to expand globally. To gain a better understanding of its international customers, Abercrombie & Fitch Co. opened regional corporate offices in London and Shanghai in 2019. It explained its international expansion approach, “we had been in the markets for quite some time but never had a team there directly. We knew we needed to take a more localized approach to stay connected to our customers and ensure we are delivering the types of products they want,” said the Director of Buying at Abercrombie & Fitch Co. Similar to many global brands and retailers, local teams emphasized the importance of understanding the competitive landscape, product seasonality and customer needs.
“We had an opportunity to become even more customer-focused and narrow in on who our customer is and what that target age range looks like to create more distinct brand identities for both Abercrombie & Fitch and Hollister,“ said the VP EMEA at Abercrombie & Fitch Co.
In terms of retail assortment planning, the Abercrombie & Fitch team saw in a target market, consumers tended to lean towards a dressier aesthetic. Using the EDITED Market Intelligence Assortment tool, the buying team breaks down competitors’ categories in that specific market and determines the categories in which the company should invest. “If we look at the number of tailored pants offered in a certain region and see the number of options offered, we can craft our long-term strategy based on if there is an appetite for these products in the market and how we can grow that particular category,” said the Director of Buying at Abercrombie & Fitch Co.
Optimize pricing across markets to optimize margins and profitability. Markets, especially local ones, are already competitive and can be hard to penetrate, especially if customers are new to a brand. Consider your pricing and assortment structures vs. local and existing competitors to ensure your assortments are right. It can be a tedious process. It requires you to identify competitors, assortment structures and price architectures most prevalent in each market.
With a presence in over 50 countries, MANGO, a global Spanish retail powerhouse, tailor their assortment planning and pricing to every local market. MANGO’s growth is determined by focusing on using retail data to understand the right products for each market and guide its pricing policies.
“MANGO must have a global and local vision of the company’s positioning in each market to execute our strategy,” said Marta Setien, Director of Pricing at MANGO. “We have different competitors around the globe. MANGO must adapt products and prices to the customer’s needs in each country.” MANGO uses retail data to help them understand what products will work best in a specific region. EDITED helps MANGO identify white space in local players’ assortments and other global retailers to uncover expansion opportunities.
MANGO’s international expansion strategy includes localized pricing across multiple regions and countries, ensuring pricing is correct for that specific market. Using retail data to its advantage, MANGO can utilize a view of the landscape of each market, unique to each country they operate, so MANGO can quickly adjust the product mix and country-specific pricing to meet local market conditions.
“For example, if a country’s exchange rate has devalued significantly, and the competitor has adjusted pricing, we can adapt to maintain market position. But, if the competitor has done nothing, we can anticipate them and improve our market positioning,” commented Sergio Domenech, Pricing Markup Analytics at MANGO.
Drive sales through localized promotions and marketing opportunities. This is also true of messaging. When entering new markets you need to be aware of local key promotional events, messaging cadence as well as context to allow you to speak to the customer in a way that sets you up for success. One way to do this is to compare local promotions of local and global competitors and key holiday or seasonal dates and events. Understand the key retail assortment items, trends or featuring the top moving products or categories with stand out messaging and key items that may feature as inspiration for getting started. Align this with the above points and cross-reference periods, aligning promotional language used to promote upcoming events and post-event discounting.
The easiest way to track local trends and retail and holiday calendars is to go beyond simply reverting to the manual processes of signing up for local competitive newsletters or following them religiously via all channels. Your marketing teams can go beyond seasonality with in-depth promotional landscape analysis with tools that automatically do the analysis for you. Look for a tool that conducts universal tracking of trends and promotions with the ability to understand when, where and how your competitors have positioned their products and perfectly time your promotions accordingly.
As you consider your global expansion strategy, partner with an industry leader to help remove the manual processes to enable and equip you with the data and insights you need to get ahead. At EDITED we help you to make decisions when they matter through speed to action with pre-prepared data insights. We marry a competitive perspective of customer preferences with a business view into product preferences, marketing touchpoints, location preferences, profitability and more. We bring you closer to your customers so you can drive personalization and brand loyalty.
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