In Search of Expansion

Retailing is more than ever a global business, and retailers are increasingly willing to operate outside their home markets. Two factors seem to bedriving this hunger for international trade. First is the economic crisis and second is the growth of online retail, which means brands are exposed to consumers across the world, regardless of the location of physical stores .

 

According to James Dolphin, head of retail agency at Jones Lang LaSalle (JLL), the economic slump that has hit Europe especially hard over the past five years has forced many brands to reconsider their location strategies. “While retail is becoming increasingly international, at the same time retailers are under growing pressure to improve profitability and margins, which often means rationalising portfolios and sifting out non-performing stores,” Dolphin says. “Expansion remains firmly on the agenda however.”

 

 

And Peter Gold, CBRE’s managing director of crossborder retail, highlights the impact of the internet on location strategy. “The growth of online retailing is further increasing the rigour with which retailers are analysing their portfolios,” he says. “While some will downsize their store presence, the vast majority are embracing the multi-channel approach — they are developing their online presence, but they are also investing in new store openings and their existing stores.”

 

It’s perhaps not a surprise given the economic troubles in their domestic markets that Italian and Spanish brands are the most international-minded. JLL mapped the presence of cross-border retailers in 57 European retail markets, and it found that Italy is the number one exporter of retail fascias. Benetton and Diesel are the most international Italian retailers, with strong coverage across the 57 markets but luxury brands like Max Mara and Emporio Armani are also well represented in all the key markets.

 

However it’s Spain’s Zara that tops the coverage league. Inditex’s flagship brand is the only retailer with 100% coverage across all the key European markets reviewed by JLL. From a standing start in 1975 the Inditex group has grown to operate more than 6,000 stores in 86 markets across the Zara, Pull&Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterque brands. As one of the pioneers of ‘fast fashion’, Inditex’s phenomenal growth has been built on two pillars — firstly it insists on knowing exactly what its customers want and secondly it has the mechanism to deliver this quickly and efficiently through the vertical integration of manufacturing, distribution and marketing. Only in what it describes as “smaller or culturally different markets” will it consider franchise agreements with leading local retail companies, so out of the 6,000-plus stores only 763 are franchised.

 

But franchisees are warned: “The main characteristicof the Inditex franchise model is the total integration offranchised stores with own-managed stores in terms of product, human resources, training, window dressing, interior design, logistics optimisation, etc. This ensures standardised store management practices and a global image from the viewpoint of customers worldwide.”

Please find the full article on page 27 of the MAPIC Preview

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Image credit : Photobank gallery

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