NEXT recently attributed an increase in its profit targets to a growth in international sales, more specifically they saw a 21.9% rise in overseas sales online this year.
This year has also seen JD Sports open their first store in the Middle East, Primark is opening stores in the US this year in New York and Texas, and Arket has opened two new stores in Milan and Barcelona.
Mitigating Risk Through International Diversification
With the economic climate in countries such as the UK being on shaky ground for the last couple of years, diversifying into international markets is a sensible strategy to mitigate any risk. One of the most compelling reasons for retailers to expand internationally is access to a larger customer base. By venturing into new markets, retailers can tap into new demographics and customer segments that were previously unreachable. This expansion not only increases sales but also diversifies the revenue streams, reducing dependence on a single market.
For example, companies like Zara and H&M have successfully expanded beyond their home markets in Spain and Sweden, respectively, by understanding and catering to the fashion needs of diverse cultures around the world. This expansion has helped them become global leaders in the fashion industry.
The Importance of Local Adaptation
However it’s not just a case of opening a physical or online store in another territory and replicating what has worked in a domestic market. Understanding local nuances and shopping behaviours and adapting to these is important for success.
Companies who have done this well include IKEA, who initially struggled with expansion in the US market due to differences in furniture size preferences. However, by adapting its product offerings and marketing strategies, IKEA successfully established a strong presence in the US. McDonald’s is another great example, they have adapted their menu to include items catering to local tastes, such as the McSpicy Paneer in India and the Teriyaki Burger in Japan.
The Strategic Imperative of Global Expansion
JD Sports are approaching their Middle East expansion in the right way under a franchise agreement with Gulf Marketing Group (GMG), who are a Middle Eastern conglomerate who have local franchise agreements with brands such as Nike and Vans. GMG’s local knowledge and contacts in the market will be invaluable for the planned 50 store openings under the JD fascia by 2028, with a focus on locations in the United Arab Emirates, the Kingdom of Saudi Arabia, Kuwait and Egypt.
Expanding to international markets is crucial for retailers seeking growth and long-term success. The benefits of accessing a larger customer base, diversifying risks, and enhancing brand recognition on an international scale make it a strategic imperative. While challenges exist, as has been seen with recent results from Next, the rewards of a successful international expansion far outweigh the risks.
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