Internationalisation of Retailing

With the advent of New Media, the last ten years have seen small and mid-sized businesses able to suddenly access new markets in far corners of the world over the internet, and through global expansion - some very successfully indeed. At the same time, a number of other socio-economic factors, like free trade and increased cultural understanding (possibly in part due to new media!) have allowed offline globalisation: the openings of new stores in far-off markets, the sourcing of materials from other markets, and even exchange of skills across borders. At Retail IT, we have experienced all of the above firsthand with our customers.

International markets present challenges in various ways to retailers, as well as the very attractive opportunities we are aware of. For instance:

• 1. Language and Culture: When businesses begin to market across cultures, they frequently encounter linguistic problems. Translating product and company names can be difficult; translating advertising slogans can be downright impossible. Over the years, some of the largest and most marketing-savvy companies have made some of the biggest translation blunders.
  
  In the 1920s, when Coca-Cola was first translated phonetically into Chinese, the resultant phrase meant "bite the wax tadpole." Pepsi too had problems with Chinese when their slogan "Come Alive with the Pepsi Generation" was translated for a Taiwanese billboard as "Pepsi brings your ancestors back from the dead." Whilst KFC found that its "Finger-Lickin' Good" slogan was translated into Chinese as the admonition "Eat Your Fingers Off."
  
  Even when a translation is accurate, marketing can be undermined by local slang. For example, when Ford Motor Co. marketed the Pinto in Brazil, they discovered that "pinto" was Brazilian slang for "small penis." Naturally, no man wanted to own a "pinto," so Ford changed the car's name to Corcel, meaning the far more manly, "horse" in Portuguese. The car reportedly sold well after that.
  
  
• 2. Supply Network Dynamics: Perhaps the best known effect of internationalisation is that of new supply networks forming. No longer do firms compete directly against one another, but in fact so do their entire networks - and not simply supply chains as in the past, but many argue that given the multitude of options available and employed by modern suppliers, these chains are perhaps now more like spider webs, or networks. The challenge for the modern retailer then, is to determine which means of supply are going to be most profitable and otherwise beneficial to the firm, having weighed implications like: cost, brand impact, quality, lead times, relationships and responsiveness, tax / transfer pricing, and transportation considerations.
  
  One of the key challenges faced by retailers in emerging markets - where distances are great and infrastructure is still developing - is that of supply. Just-In-Time systems are rarely effective in these conditions, and so other factors become crucial, in particular, replenishment. In this milieu, it is crucial to have a very strong gauge of what product might sell at which volumes in each area, and to be able to maintain those stock levels accordingly, lest damaging sell-outs occur.
  
  
• 3. Regulatory Environment and Tax: Laws across countries differ. Sometimes it may be possible to clarify these in advance in a contract (which may not, however, be consistently enforced); at other times jurisdiction may be settled by treaties and broader documents and precedents. It is crucial to have an awareness of the idiosyncracies of law in countries retailers seek to expand into.
  
  Some legal systems, such as that of the U.S., are relatively “transparent”—that is, the law tends to be what its plain meaning would suggest. In some countries, however, there are laws on the books which are not enforced (e.g., although Japan has antitrust laws similar to those of the U.S., collusion is openly tolerated). Further, the amount of discretion left to government officials tends to vary. In Japan, through the doctrine of administrative guidance, great latitude is left to government officials, who effectively make up the laws.
  
  Varying tax codes and the challenge of selling different products at different rates in different regions to different clients can prove problematic, not on the more abstract compliance level, but also on the practical systems level.

There are no easy answers to internationalisation. Best practice requires rigorous research, and well-informed staff, as well as a dash of luck.

But there are some shortcuts that make it easier - like having local partners who understand the environment and who have navigated those challenges before. Having a partner whom you could consult at the drop of a hat on, say, how to deal with multiple tax rates in multiple countries at point of sale; or on how to smooth supply and replenishment issues in hard to reach parts of the world, is considered a major boon to most retailers, and a significant intangible asset in facilitating their expansion.

Retail IT works with UK retailers and helps them to co-ordinate and implement their expansion into foreign markets. We’re experts in retail, and our software solution, Yourcegid, has an extremely well developed and managed partner network across the globe to aid in your rollout, and to provide that local knowledge that no fact sheet can give you on a market.

(Add to that Cegid’s powerful international retailing system with: dynamic currency conversion, multiple tax codes, instant and automatic translation, fully real-time stock data across stores, subsidiary and advanced replenishment capabilities - and it’s clear why some of retail’s biggest names continue to choose Yourcegid retail solutions.)