International Retail Marketing

Christopher Moore, Margaret Bruce, Grete Birtwistle

• Publisher: Routledge
• Year: 2007
• ISBN:
  9781136393808
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Business allgemein

International Retail Marketing combines a broad thematic overview of the key issues concerning international retail marketing with a series of incisive cases and examples of industry practice from markedly different sectors as fashion, food and healthcare. The authors provide an accessible and wide-ranging outline of the fundamentals of the subject, such as trends in retail marketing, strategy and logistics, and buying and merchandise management within an international perspective. Contributions from Europe, North America and Asia show the dynamics affecting international retailing through a variety of case. Key discussion points are highlighted throughout the text, giving a hands-on focus.

Section 1 Perspectives of international retailing

DOI: 10.4324/9780080473123-1

Chapter 1 Retailing within an international context

Christopher M. Moore and John Fernie

DOI: 10.4324/9780080473123-2

The purpose of this chapter is to examine the key themes and issues pertinent to the internationalisation of retailing. Drawing from the relevant academic literature, the aims of the chapter are as follows:

• to define the nature and scope of retailer internationalisation;
• to ide.webpy the motivations for international expansion;
• to review the direction of international expansion;
• to consider the methods of market entry that internationalising retailers adopt;
• to review the conceptual frameworks which seek to explain retailer internationalisation.

1.1 Introduction: who are the international retailers?

Retailing is predominantly a domestic market activity. The total business of the vast majority of retailers is done within one particular country and in many cases, within one specific region or district. Consequently, when compared to other sectors, the proportion of foreign assets to total assets within retailing is low. As such, it has been noted that international retailing is still a minority activity for the majority of retailers (McGoldrick, 1995).

That said, even the most perfunctorily review of the structure of the retailing sector indicates that an increasing number of retailers no longer confine their trading activities to the home market. For example, fashion retailers, such as The Gap, Gucci, Escada, Ralph Lauren, H&M, Benetton, Mango and Zara have recognised the international appeal of their brand image, product ranges, and merchandising methods and have sought to exploit these advantages through the development of extensive international store networks. For many of these fashion retailers, their international performance has been impressive in terms of the speed of their expansions, the breadth of their foreign market coverage and the contribution of foreign sales to their total sales income levels. Furthermore, many of these retailers have become household names on a global scale and this is a further testament to the depth of their international success.

However, by virtue of the fragmented nature of the ownership characteristics of fashion retailing, both domestically and internationally, the international sales of each of the leading participants is relatively insignificant in the grand scheme of international fashion expenditure and none of them currently have the capability to disrupt the structure of any significant foreign market in Europe or elsewhere. For example, one of the world’s best recognised and most prolific brands, Ralph Lauren, reported sales for the period 2002/2003 of $2.4 billion, of which just over $520 million (21 per cent) was derived from foreign markets.

When compared to the leading international grocery retailers, the international profile of Ralph Lauren is somewhat eclipsed. For example, Planet Retail (2002) provides a vivid account of the international significance of what Wrigley (2002) has described as an ‘elite group of multinational/trans-national operations’ (TNCs). Table 1.1 presents a profile of the world’s largest grocery retailers in 2000/2001.

Table 1.1 Largest grocery retailers in the world by sales in 2000

Source: Planet Retail.

From Table 1.1 it is clear that, while Wal-Mart is easily the world’s largest grocery retailer as measured in terms of total sales, it lags behind the other main retail TNCs in terms of the contribution of foreign sales to total sales. However, Fernie et al. (2003) note that Wal-Mart’s forecasted sales for 2010 are in the region of $700 billion, of which the contribution of foreign markets is estimated to rise to 27 per cent of that total. To envisage the sheer scale of this growth, if international sales were to grow in line with expectations, then the contribution of foreign sales would equate to the equivalent of all of Wal-Mart’s sales in 2000/2001.

The emergence and future dominance of what Wrigley (2002) predicts to be a tiny elite of international grocery retailers has, and will be continued to be sustained by, consolidation within the European grocery market in particular. As Fernie et al. (2003) observed, to be a truly global retailer, a company needs to achieve credible scale in Europe, which requires a leading position in at least two of the three largest markets: Germany, France and the UK. Figure 1.1 is the overview of Wrigley (2002) on the structure of the European Union (EU) food retail market and the inter-linkages between firms highlights the collaborations that have occurred but also indicates the potential for links/consolidation in the future within the sector.

Figure 1.1The structure of the EU food retail market and the inter-linkages between firms in that market in mid-2001

The purpose of the comparison between the scale of international sales for the grocery elite of Wal-Mart, Carrefour, Ahold and Tesco and that of the leading international fashion retailer Ralph Lauren, is to highlight the fact that when we consider the internationalisation of retailing in the early part of the 21st century, we must recognise two distinct strata or groupings of international retailer. The first is a unique, small and immensely powerful grouping of grocery retailers that has (and will continue) to transform the landscape of global and domestic retailing. Wal-Mart, Carrefour, Ahold and Tesco in particular, are the distinctive groupings. Any review of the international development of retailing must necessarily acknowledge the distinct position that they have achieved.

The second stratum is in effect all of those other retailers, of varying size and influence, who participate within foreign markets. Many of these are immensely important by virtue of the extent and spread of their foreign market participation. But the dimension which distinguishes these from the grocery elite is that while some are truly global companies, such as Ikea, Benetton and Toys ‘R’ Us, none of them provide a significant challenge to the retail structure of any of the large national markets of the world. Various attempts have been made to classify this ‘other’ grouping. Among those ide.webpied by Hollander (1970) were the luxury goods retailers (such as Mappin and Webb and Gucci); the general merchandise retailers (such as department store retailers, variety and discount retailers, and mail order firms); speciality retailers; trading companies and direct selling and automatic vending firms.

In many respects, other than for the demise of the trading companies and the emergence of Internet-based retailer, such as Amazon, the classification provided by Hollander remains robust and serves this chapter well in terms of providing an inclusive description of the key groupings of international retailers. The remainder of this chapter, while acknowledging the importance of the elite group of grocery retailers, will seek in particular to redress the omissions of other texts on international retailing (which have tended to ignore the foreign market development of fashion and luxury brand retailers) by focusing upon their international activities.

Before exploring some of the key issues of retailer internationalisation in depth, it is important that three further points are made. The first is that while it is undoubtedly the case that the international expansion activities of retailers have increased significantly over the past two to three decades, it is helpful to note that this is not a recent activity. A number of companies have had long experience of operating stores abroad. For example, as Alexander (1997) noted, Burberry of London opened their first store in Paris in 1909, while Liberty of London opened their first foreign branch some time earlier in 1890. W.H. Smith opened their Parisian store in 1903.

Secondly, it is important to consider the academic ju.webpications for focusing exclusively on retailers international activities. Pellegrini (1994) maintained that studies of retailer internationalisation provide for a deeper understanding of retailers’ strategies for strategic management and growth, while Tordjman (1994) suggested that such investigations serve to highlight pan-national differences and convergences in consumer behaviour. Other researchers have proposed that the study of retailer internationalisation provides important insights into our understanding of the nature and characteristics of retailer decision-making (Burt, 1991; Dawson, 1994; Clarke and Rimmer, 1997). From another perspective, Burt (1995) has suggested that the wider availability of information and databases related to retailer internationalisation has served to facilitate the increase in research attention in this area.

Finally a variety of themes relevant to retailer internationalisation has subsequently emerged in the literature as ide.webpied by Doherty (2000), and these relate to the scale and extent of retailer expansion (Brown and Burt, 1992); the direction of international expansion (Burt, 1993; Davies and Fergusson, 1995); the motivations for international expansion, as well as the methods of foreign market entry adopted (Alexander, 1990; Williams; 1992; Dawson, 1994; Sparks, 1996). Drawing from these central themes, the focus of this chapter will be to consider the nature and characteristics of these various dimensions.

1.2 The nature and scope of retailer internationalisation

Since the early 1990s, efforts have been made to provide clear definitions of what is meant by retail internationalisation. Brown and Burt (1992) recognised the need to ide.webpy what is that retailers actually internationalise: ‘Is it management expertise and management systems? Innovative forms of trading? or unique retail brands?’. Without this clarification, they argued, it is impossible to adequately explain whether the international experience of retailers is similar to those of other sectors or whether these are in some way unique.

Hollander (1970) defined multinational retailers as ‘those firms that are in some way responsive to the headquarters (HQ) located outside the country, or colony, in which the retail sales are made’ (p. 10), while Sparks (1996) noted that researchers in this area have tended to draw from the international marketing literature in order to define the parameters of what constitutes an international retailer. Among the most important contributors to research in the area of international business were Johanson and Wiedersheim-Paul (1975) who (based on their studies of the international expansion activities of Swedish manufacturers), suggested that the term ‘international’ defined something of the business orientation, management character and the attitude of the firm. Furthermore, they suggested that business internationalisation was essentially an incremental process which begins with the exporting of goods to foreign markets and comes to fruition when the firm established manufacturing sites in the foreign market so as to satisfy the foreign demand.

Likewise, Johanson and Vahlne (1977) stated that the internationalisation of business was essentially concerned with the incremental movement and extension of production, sales and distribution capacity from the home market to a foreign market. The primary interpretation of business internationalisation within the literature has been to see this form of growth as an incremental process where the manufacturers increase their involvement in a foreign market through indirect forms of investment, culminating in the establishment of a subsidiary company for sales and manufacturing in the foreign market (Cavusgil, 1982).

In the 1990s, researchers working in the area of services marketing, and in particular, the internationalisation of service provision, have challenged the appropriateness of transferring manufacturing interpretations to the service sector. Through the ide.webpication of the intangible, perishable and heterogeneous nature of service provision, it has been noted that while the internationalisation of manufacturing may advance incrementally, in contrast for service providers, full market involvement is typically required immediately (Dahringer, 1991; Katrishen and Scordis, 1998). Consequently, there have been calls for an understanding of business internationalisation which also recognises the invisible dimensions of foreign market participation, such as the transfer of business know-how and management experience, marketing skills, technological capability and other forms of professional services from one country to another (Clark et al., 1996; Knight, 1999).

Similarly, within the context of the internationalisation of retailing, it has been noted that the definitions of the internationalisation of manufacturing may not readily accommodate the scope, extent and complexity inherent to international retailing. For example, Dawson (1994) has argued that:

The balance between centralised and decentralised decision-making, the relative importance of organisation and establishment scale economies, the degre...

Table of contents

• Cover Page
• Half-Title Page
• Dedication
• Title Page
• Copyright Page
• Table Of Contents
• List of figures and tables
• Preface
• Foreword
• List of contributors
• Acknowledgements
• Introduction
• Section 1 Perspectives of international retailing
• Section 2 Issues and cases
• Index