The RAI (Retailers Association of India) was first launched in 2008 but as part of A.T. Kearney’s 10-year anniversary of the larger GRDI research, it has pulled out seven key lessons learned during a decade of looking at international retail expansion.
“Western retailers have not yet grasped the level of growth and are still underestimating the magnitude of the [international] opportunity,” says Shabat, of the extent to which the retail landscape in developing markets has changed since 2001.
The population in the 30 developing countries surveyed has grown from 5 billion to 5.8 billion over a decade and there has been a 92% increase in per capita spending on retail, and a 225% increase in retail space.
AT Kearney’s seven takeaways from the past decade include two of particular relevance for apparel retailers: taking a portfolio approach to expansion; and recognising just how discerning consumers in developing markets are. The seven lessons are:
- Market selection is both art and science: Market analysis alone is not enough to decide where to expand. Brand fit and probability of success. E-commerce is becoming a common practice to test new markets, along with trialling alternate store models and service delivery options
- Global expansion is a portfolio game: Leading global retailers take a portfolio approach to expansion, allocating resources based on varying risk and performance profile. Maintaining a presence in both mature and developing markets ensures balance
- Consumers in developing markets are discerning: Consumers in emerging markets expect high-quality products and this should not be underestimated. Meeting consumer needs such as offering store credit, or understanding how unique shopping behaviours are evolving, is crucial
- Local competition is often stronger than it appears: Domestic retailers are savvy in local consumer taste and legislation, they are also adept at learning quickly from international competitors and adapting operations accordingly
- The rules are different for global and national organizations: Clear guidelines on key decisions around pricing, assortment, sourcing, formats, layout and promotions are necessary to operate in the global marketplace, whether these decisions are made at a central, regional or local level
- Local talent is crucial: Recruiting nationals must be a priority. The quicker you can get local talent running your business (and embracing your philosophy) the better
- Global expansion requires a long-term view: Global retail expansion is not for the impatient. Breaking even can take between three and seven years