Problems in Globalization of Retailing
Over the last two decades a number of successful domestic retailers have tried to enter new markets but have had little success. The following are some of the situations or problems in globalization of retailing.
1. The retail format did not travel well or the firms overestimated the attractiveness of their domestic format to consumers in global market.
2. There are significant problems to face generally in the globalization of retailing, particularly around the issues of the psychic distance.
3. There are very substantial differences between different cultures both in their frequency of and attitudes to, shopping, in the product preferences, and their quality standards too.
For example, Wal-Mart found that local Brazilian suppliers could not meet their standards for easy to handle packaging and quality control, in China they stocked the wrong merchandise and in Mexico consumers did not find enough US imported products. In some countries the access to suitable locations at an acceptable cost has been limited.
4. The cost of purchasing land and building suitable stores and undertaking sufficient promotion to establish the brand is likely to limit the rate of expansion of even the most profitable retailer.
Essential elements of successful retailing
The essential elements of a successful retailing format are
1. Well organized and wholly owned stores
Attractive stores well recognized for selling distinctive and high quality merchandise and supported by a well-respected brand. To establish a successful format simultaneously in a number of countries, however, can prove to be prohibitively expensive if the facilities are wholly owned.
2. Alternate market entry
Use of alternative market entry methods to total ownership, such as franchising and joint ventures has helped to speed up the internationalization of retailing especially in areas where the foreign country is culturally different or is difficult to enter because of legal controls, for example, local joint venture partners are mandatory in the Philippines.
3. Ideal Partnership
The choices of partner and contract agreement are vital as the objectives of each must be met. The trade-off in the joint venture agreement is that the international partner gets new market access by using the local partner’s knowledge and network whilst the local partner gets access to the international retailer’s new retail formats, product range and management skills.
Often, there are few ideal partners and being the first mover allows the MNE to join up with the best partner. If globalization of retailing requires an individual retailer to be represented in the majority of the countries in the world then it is likely to be some time before this might be achieved.
4. Innovative approach
By using the Internet, virtual global retailing is a much more likely proposition. However, as with other business sectors more innovative international marketing approaches are being used by retails to extend their global reach.