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Blog / Jun. 23

Going Global for Growth: Why Emerging Markets Are are a Requirement for Global Retail Leadership

Dave Bruno

One week from today, Aptos will be presenting the webinar, Easier than You Think: Going Global to Fuel Growth in partnership with RIS News. Click here to register.

The free webinar will mirror the conversations people at Aptos are having with our customers about the best ways to take their brands global, as either an initial foray or as ongoing efforts to break ground in new regions. For most, the appeal of international expansion is significant: opening new borders represents an opportunity to fuel growth – always top of mind in the retail C-Suite- by breaking away from a highly saturated U.S. market.

It’s not surprising, then, that our clients are some of many US retailers who in recent years have entered new or emerging markets that are not yet saturated. In fact, according to a recent report from CBRE Group, retailers in the U.S. led all nations in global retail real estate expansion in 2015, opening more stores overseas than their counterparts from any other country.

Consider these statistics:

  • Emerging markets were home to 1.6 billion Internet users in 2015—of whom 500 million had made at least one online purchase
  • At approximately $136.5 billion in annual revenue, Walmart’s international segment is far and away the fastest growing revenue segment in the company.
  • By 2020, significant numbers of consumers in emerging markets will cross the critical annual household income threshold of $5,000, placing them in the “global middle class” and enabling more discretionary spending. Although still considerably poorer than middle-class consumers in advanced economies, their vast numbers will create enormous new market opportunities. According to Bain, their estimated contribution to global GDP by 2020 will surpass $10 trillion.
  • The size of the global apparel business is expected to generate double digit growth through 2020. According to McKinsey & Company, much of the growth will come from developing markets. In addition, McKinsey predicts that by 2025, 55% of mid-market apparel sales will come from emerging markets, up from just 25% in 2004.

The business case for opening new markets is so compelling that analysts at Boston Consulting Group insist that winning in emerging markets is a requirement for any retailer seeking to achieve, maintain or extend its global leadership.

The path to global leadership, however, is not for the faint of heart. Let’s take a look at three common challenges in international expansion.

  1. Taxes Can be Taxing: Federal taxes, local taxes, value added taxes, income taxes, payroll taxes…the list of tax codes to manage goes on and on. The pressures of shifting global markets, demanding disclosure requirements, and the need for immediate visibility into cash taxes have all converged to put more pressure on corporate taxation than ever before. And as geographic market expansion increases, so do the tax challenges. Tax laws around the globe are constantly evolving, and it is imperative that retailers have systems and infrastructure in place to ensure compliance.

 

  1. Be On the Lookout for Local Laws:Perhaps one of the most daunting barriers for retailers moving abroad is the complex “spider’s web” of duties, taxes, regulations, and export and import laws they face as they enter any new geography – be it country, province, state, city or village. Often times, it is the obscure laws that can be the most difficult to uncover and adapt to.

 

  1. Lost in Translation:While there are obvious translation challenges to overcome when expanding into a new market, there are also other language and communication nuances to address, such as time and date formats and preferred methods of correspondence.

Regardless of the languages, devices and formats involved, literal translation alone is not enough. Subtle differences in language can have major differences culturally. The marketing landscape is littered with examples of slogans and messages that have failed the cultural translation test such as:

  • When Kentucky Fried Chicken branched out into China, their U.S. slogan, “Finger-lickin’ good” translated to a not-so-appetizing Chinese “Eat your fingers off.”
  • Ford Motors launched a campaign in Belgium that U.S. execs thought said “Every car has a high-quality body.” However, when translated, the slogan read, “Every car has a high-quality corpse.”

To help ensure your global expansion efforts have a higher success rate than the advertising campaigns mentioned above, join our webinar to discuss how retailers can ease the transition to new geographies.  Click here to register.

We’d also like to hear your viewpoints and experiences with global expansion, by commenting below.