Geographic borders are being broken down in apparel retail by an increase in the number of brands launching into new countries through online offerings. While this is a great opportunity for under pressure retailers, competition will become tougher, finds Datamonitor Retail.
Research by the independent retail analyst has revealed that although moving into new countries offers an increased customer base, retailers should think carefully about their strategy to ensure they have the basics in place, if they are to stand a chance of competing with local retailers.
Natalia Grabov, analyst, Datamonitor Retail, says, “Retailers are employing different strategies to enter a new market. One of which is to launch their existing e-commerce website in new markets. This is a cost-effective way of exploring the market and understanding demand before promoting heavily. This can then be followed by a physical store or a localised website.”
“However, unless they invest in some essential basics, there is a risk of developing a poor reputation before the retailer has a chance to formally launch. Ultimately, a bad experience on a site can stay with a shopper for a long time, even if a retailer later makes up for it,” Grabov adds.
Datamonitor Retail believes one of these basics is ensuring that the information that is vital to customers is easy for shoppers to find. For example, if the retailer has only one global site, they need to ensure sizing details and delivery information are displayed clearly. Also, promoting delivery destinations is vital to ensure sales from multiple countries. For example, the Topshop site has a banner on its homepage with a clear link to a table listing every delivery destination.
Retailers can, however, benefit further from launching localised online stores. Although this is a more costly strategy for retailers, it has its advantages. If the site isn’t local, it makes keeping shoppers happy harder due to a number of reasons, including logistical issues. For example, UK-based retailer ‘Next’ doesn’t have any physical standalone stores in the US, so shoppers have to return items by post and as they have a very limited time frame to do this, as well as the cost involved, the retailer has to work harder to ensure shoppers aren’t put off.
One retailer which has ensured it launches into new markets using localised stores is Japanese company Fast Retailing. The retailer owns a number of brands, including Uniqlo, and there is a physical store in each country where the brand has an online store. Importantly, each market has its own web domain and only delivers within that country. Although we expect Uniqlo to extend its shipping service from the UK site to mainland Europe, this will correspond with its plans to open physical stores there.
Grabov says, “Uniqlo’s strategy is undoubtedly more costly than launching online only stores first in a new country. However, it has its rewards as it is able to tailor its online store to that specific market more importantly, it will allow Uniqlo to complement its online store operations with its physical stores.”
“Over the next year, we will see more retailers pushing into new markets and the different strategies they use will be vital in ensuring they are able to compete with the retailers in the local markets. Essentially, in the online space, it is all about speed, so those who can get into new markets without compromising their service will reap the rewards,” Grabov adds.