Author: Demetrius Williams, TranslateMedia
A recent report by JJL1 looked at key trends in retail expansion by examining 240 global brands across 140 cities. Hong Kong was the top country in Asia as a destination for international expansion, followed by Shanghai, Singapore and Tokyo.
The UK ranked in the report as the third largest exporter of retail brands, making up 13% of the total international retailer presence.
An increase in tourism, widespread use of technology, and successful mobile innovations has led to many cities in Asia turning into prime retail destinations for consumers and retailers alike. Brands such as Burberry, The Body Shop, and Lush have all had huge international success – particularly in Asia – due to localising their international presence.
So what can we learn from the UK brands who have successfully entered cross-border markets in Asia?
Expanding into new markets can come with a host of obstacles. Many administrative tasks needed to trade in Asia (while simplified in the west) can be time-consuming and may require additional resources.
Businesses that wish to develop in China are advised to have some form of administrative presence within the country. Documents that are usually completed electronically need to be filled in and stamped by hand and trading licences are also produced as physical certificates. Administrative support with local knowledge of business and with Guanxi is also a valuable asset.
Tesco rolled out a number of large stores in China in 2004, introduced its Clubcard loyalty scheme and even sold live turtles and toads to gain the upper hand in the market. However, poor sales led to the international food retailer partnering with state-run China Resources Enterprise to continue trading, leaving Tesco with only a 20% stake in its Chinese stores.
Research carried out by Qing Wang2, professor of Marketing and Innovation at Warwick Business School, suggests that Tesco failed to understand the Chinese consumer and relied on its loyalty scheme to lure customers from its competitors.
Wang’s research also stated that 63% of Chinese consumers have at least 4 or more loyalty cards from different brands. This suggests that Chinese natives prefer the freedom of choice when shopping and use loyalty schemes to benefit their individual needs.
Language barriers can obviously be a significant obstacle to any business. From product names and product development to store structure, understanding language and culture will allow a retailer to compete more effectively in a local market.
While eCommerce continues to grow year on year, there is still demand for a physical space in the right location.
CBRE reported a study3 of the most popular markets in the world for physical store expansion, and ranked China fourth globally, and first in Asia Pacific. Japan ranked seventh globally, and Singapore ninth.
All Saints continues to have international success with store openings in South Korea, Taiwan and recently Japan. The London-based retailer announced that its 12% international sales growth4 was driven by sales in Asia.
Launching internationally with smaller retail spaces and in department stores, the London-based fashion brand was able to develop and maintain its brand aesthetic and also control production costs.
The iconic brand has been able to carefully translate its extensive collection (which extends to homeware, accessories and childrenswear) to a carefully edited selection of menswear, womenswear and bags. AllSaints also produced regular drops of new product (exclusive to the store) and is slowly increasing its main collection based on consumer buying habits.
By executing a slow expansion strategy, with local relationship-building, the retailer has protected itself from currency fluctuations. It now has a ground presence in 18 countries, and ships to over 200.
New Look plans to open 500 new stores in China within three years, taking on the likes of H&M and Zara. The fast fashion high street brand has decided to design and produce its products locally. This enables the retailer to tailor its products to local fashion trends while reducing production times to meet its high sales expectations.
Cath Kidston has had huge international success due to its Asia franchises. With Asset Management firm Baring Asia now holding a majority share of the company, it has recently expanded to India and opened another store in Japan.
The womenswear and accessories brand famed for its floral prints attributes its recent success and Indian expansion to its prudent analysis of online sales. By using eCommerce sales and customer behaviour data, Cath Kidston is able to gather actionable insights to map out potential new markets.
With the continual growth of eCommerce sales, many British brands have become global players in the retail market. Revenue from eCommerce in Asia5 grew to over $503 million (23.62%) in 2016 and it’s expected to grow a further 22.5% in 2017.
Fulfilment can pose a challenge for retailers expanding overseas. There are various competitive rates for sending parcels in the UK; however fulfilment overseas from the UK can be costly, which obviously impacts retailer’s margins.
With the launch of its Tokyo store, AllSaints also launched a Japanese website6. The homepage and product and content pages are fully localised. Its partnership with Locondo allows the retailer to offer streamlined delivery and returns options, and provides cost-effective warehousing solutions.
Retailers that don’t have local logistics solutions would need to look at the most competitive rates for international fulfilment, and possibly consider absorbing some of the costs in order to meet customer expectations.
Increased global competition online has led to retailers capitalising on the opportunities of ecommerce localisation. From website and social media translation to optimising digital marketing campaigns, implementing an online localisation strategy should become best practice for a business to achieve international success.
Many brands use transcreation as an ongoing process to adapt their aesthetic, style and tone of voice to reflect the local culture. Many marketing campaigns are created to evoke emotion and, if executed correctly, transcreation can avoid key messages being lost in translation, improve user engagement and increases conversion rates.
Retail brands will have different strategies for expanding in Asia’s growing retail market. Whether it's keeping all resources in the UK or investing in local infrastructure, the key takeaways seem to be knowing your audience and debunking the one-size-fits-all approach to content and marketing strategies.
Businesses are now continually being challenged to be forward-thinking and culturally sensitive in order to achieve success in Asia. But to truly get the upper hand in this thriving market, knowing your audience is fundamental and establishing localised working relationships is a highly favoured asset.