INTERNATIONAL RETAILING International trade and commerce has existed for centuries and played a very important part

in the World History. However International Retailing has been in existence and has gained ground in the past two to three decades. The economic booms in several countries, coupled with globalization have given way to Organisations looking at setting up retailing across borders. The advent of internet and multimedia has further changed the dimensions as far as International Retailing is concerned. Who are the International Retailers When you think of International Retailers the names that come to ones mind would be the Wal-Mart, Gucci, Ralph Lauren, Mango, GAP etc. All of these are International Retailers. However we can broadly classify the International Retailers under two categories. The first category would be the global grocery retailers and the second category belongs to the International fashion Brands.

International Grocery Retailers The Companies namely Wal-Mart, Carrefour, Metro, Tesco and Ahold etc are the leading international grocery retailers who have multi country presence. Major portion of their total revenue comes from foreign sales. Wal-Mart operates in over 8,500 stores in 15 countries with foreign sales contributing to 18% of its $405,046 billion net sales (2000). Carrefour, a French international retailer has presence in 32 countries with foreign sales amounting to over 48% of its net sales. These international grocery retailers follow a multi brand and multi product business format which includes all products like food encompassing all types of fresh vegetables, fruits, juices, chocolates etc, fashion and clothing including bed linen etc, grocery, all types of branded consumables, as well as liquor and many more household goods under one roof. They generally follow a format that allows for selling to whole sellers, retailers as well as general public at the mega stores. Traditionally these International Grocery Retailers have operated mainly in US and in Europe. Specifically in Europe the largest markets have been in Germany, France and UK. With globalisation and with several countries opening their markets to FDI in retail, these Organisations are moving into other parts of the world and into emerging markets. There is yet another group of International retailers like IKEA, Lego, Toys RUs etc who have chosen to focus and specialise in a particular segment like furniture etc. International Fashion Retailing Names like Ralph Lauren, Gucci, Zara, Hugo Boss, JC Penny, Benetton, Jimmy Choo, Swarovski, Dolce & Gabbana etc belong to the second category of International Fashion Retailers. Originally these Companies catered to domestic markets in the countries of their

origin. Fashion and Luxury brands have always been known by their label and brand value across countries, through word of mouth and sought after by the rich and famous from all over. Over the years, these companies have realised the opportunity in expanding their product mix and promoting their brands internationally. Thus we see the emergence of international fashion brands, luxury product brands dealing exclusively with branded clothing including sportswear, casual and formal wear, party wear, foot ware and accessories, luxury items including watches, perfumes, jewellery and many more items of personal use. In the earlier times, the nova rich and the business class were the main customers who sourced these branded products from abroad. However in the recent times we see the educated and economically empowered youth demanding fashion and going in for branded items. International brands have thus established a niche for themselves in domestic markets aided by the increasing demand for branded fashion products. International grocery retailers have expanded their business in emerging markets by virtue of their investments and procurement strategies. FEATURES AND CHALLENGES International Retailing and branding has been one of the sectors that is seeing exponential growth. With increase in standard of living and disposable income, people in developing countries are getting exposed to international brands. Rise of internet and multi-media has further provided impetus to the dream of people to aspire for branded consumer goods. Along with the rising awareness and aspirations of the people, the opening up of economies and foreign direct investment opportunities have fuelled the growth of international retailing business. International Retail business consists of two groups of businesses. The biggest value and volume business happens to be the International Multi brand grocery Retailers like Wal-Mart, Tesco, Metro and Carrefour etc. The second group of international retail business refers to the fashion brands mainly in fashion, luxury brands and personal product category of businesses. In this topic we aim to explain some of the characteristic features and challenges of the second group of International retail business dealing with fashion and brands. Brands such as Ralph Lauren, Hugo Boss, GAP, Dolce & Gabbana, Gucci, Escada, Armani, Versace, Louis Vuitton and many more are known all over the world and are available at exclusive showrooms in various countries. In the past two to three decades all these brands have grown to become Global brands, and this has been made possible by their strategic branding, multi product range expansion and innovative merchandising methods. Though International Retail Companies are Global businesses, the business and products are hugely influenced by the multi cultural and pan country specific product requirements. The product categories largely comprise of fashion clothes, food, gadgets as well as personal and luxury products. Each country and each market is characterised by different fashion trends and consumer behaviour. While the products are fast moving and have very short shelf life,

the local culture and outlook has a large part to play in the localisation of the international brands in domestic markets. These global companies therefore are forced to work on global branding as well as local brand promotion and have international as well as domestic-country specific customer reach programs and marketing as well as promotional methods. International Retail Companies have several inherent challenges that they face in their line of business. Product innovation and product mix happen to be the biggest challenges for these companies both at global as well as country specific domestic levels. The survival and growth of the brand is directly dependent upon these challenges. The global retailers have to be tuned in to the international as well as domestic specific fashion in each of the countries and get their product mix right for each of the markets. Service quality and merchandising methods too, play an important role in the brand visibility and reputation. Pricing of products is yet another challenge faced by the brands. Developing and emerging markets are highly price sensitive. When the international brands are trying to make an entry into the new markets, they have got to have an entry strategy that takes into account the price sensitivity and profitability as well. Procurement and Supplier reliability as well as quality marks one of the challenges that these companies face as they happen to source materials and products from several countries. Quality and reliability as well as in time supplies and logistics is always a challenge that can make or break the business which is highly seasonal in each country. In the recent years we have seen the emergence of ethical practices playing a vital role in the procurement policies of these international companies. The companies have got to ensure that their sourcing partners do not employ child labour or employ unethical methods in manufacturing the products and as principle buyers these companies are held responsible. Ethical buying has gained global visibility and these companies have had to be watchful to ensure compliance or risk unwanted publicity and public outcry. International retailing business is high volume business. To be a successful international brand, the Companies have got to adapt the right strategies, be aware of the local cultural as well as political environment in the market and more importantly manage the brand promotion and supply chain perfectly. The challenges faced by the business are several but so are the business opportunities.

DEFINITION OF INTERNATIONAL RETAILING Ever since International Retailing started getting recognition in the industry, several academicians as well as Industry experts have tried to come up with exact definition. The attempt to define International Retailing raised a legitimate question as to what exactly the retailers were internationalizing. Unless the correct fact was established, there could be no right definition. Some asked if the Companies internationalised their management systems, management expertise or the brands. The famous International Business researchers Johanson and Wiedersheim-Paul who had studied the growth of Swedish Companies suggested that the term International can be attributed to the Business orientation, the management style and orientation. They further

elaborated that in the first instance the Companies began exporting products to other countries and further growth of business entailed setting up manufacturing facilities in the foreign countries. Though this might have been the trend seen in manufacturing organisations, the same has not been totally accepted in the retail sector. Experts have questioned the validity of the concept with reference to the services sector. They argue that the manufacturing or the product sector can go international in a phased manner but the same is not the case with service sector. The nature of service sector being intangible and instantaneous, calls for full fledged operations of international standard to be setup at the time of opening up business in a foreign country. Studying the nature of transactions and growth of internationalisation of other industries as well, the academicians have tried to see if the international business trends in terms of mergers and acquisitions, technology transfers as well as transfer of marketing and management skills and training etc are required to be included in the proposed definition of International Retailing. When one refers to International Retailing, there are several dimensions of the trade that needs to be considered before attempting to come up with an apt description of the business. First and foremost is the invisible aspect of financial investments. Companies get into joint ventures and invest in the foreign retail company with or without management control. Secondly we must look at the areas where the retail company is transferring knowledge or processes to the new set up. In retail sector there can be many aspects of retail business, the knowhow of which are transferred to the new establishment. The business model, the management and operational policies and processes, financial accounting systems, supply chain model as well as the retail store design and layout concepts, merchandising processes and more importantly the systems and processes that are used to manage multi retail stores and outlets can be transferred by the parent company to ensure an identical setup at the new location. Marketing, brand promotions and customer management policies too will be shared to ensure standardisation of processes in all areas across countries. Most companies would insist on ensuring that the new foreign outlets follow the same operational, costing and accounting as well as reporting and measurement models as that of the parent company. The most important area that can be actually internationalised would be the sourcing function. Central Sourcing and vendor management from multiple countries for multiple countries is the strong feature that characterises the International Retailers. Going by the above features, we can identify the International Retailers from that of the individual brands and other international traders.

International Sourcing is the Backbone of International Retailing In the current times International Retailing industry is largely characterised by international sourcing. Though one might argue that for centuries countries have been engaged in sourcing materials from different countries, international sourcing as in the retail trade has grown and changed over a period of time. In the initial stages, the impetus for retailing of branded products was provided due to the brands having established themselves with the customers as providers of quality products as well as designs. Once the customers began to identify particular brand with a particular type of design as well as quality product, the perception stuck and fuelled demand for the particular brand. Thus the brands began to be stocked by the whole sellers who in turn supplied to retailers. The brands used to rely upon the local in house manufacturing plants or from domestic suppliers who would be contracted to supply as per the brand design. Gradually with increase in cost of manufacturing, the brand managers had to evaluate alternate options to keep the costs down. Subsequently they began to look at importing the raw materials from the overseas suppliers and get them manufactured locally. When this option was not feasible, companies began to look at various international markets for sourcing their made to order products. If one reviews the global sourcing plan of some of the biggest buyers mainly from Europe and US, we find that they procure different items from different countries. Some of the countries specialize in some of the raw materials which may not be available in other countries. Items like Cotton, silk, ethnic fashion jewellery; embellishments etc are normally sourced from India, Hong Kong and other Asian markets. Similarly fashion jewellery in bulk is available in China. Some countries like Mexico, S.America and China have set up huge manufacturing capacities for Exports. In such cases the raw materials from other countries are shipped out to these factories who assemble| manufacture and export to the final destination like Europe or US. In some of the cases, the products are imported into the country in parts and assembled at the final destination with the label showing as manufactured |assembled in the destination| home country. Therefore sourcing is mainly dependent upon the markets where raw materials are available and the country where cheap labour and low cost manufacturing facilities are available. Today international sourcing strategy and operations hold the key to the success to international retail businesses. First and foremost the international retailers have got to have the right procurement strategy and procurement policies. Existence of a reliable network of suppliers that can supply the products in time and with desired quality standards is the next important step that defines the success. As the right products have to reach the markets within the time frame in each season, a strong supply chain model that is capable of managing seamless end to end supply becomes the key differentiating factor for the business. Thanks to technology, supply chain can today be managed efficiently at global levels. With the growth of international markets, sourcing too has grown over a period of time. In current times most international buyers have established global procurement offices, agents

across the globe that manage key suppliers to ensure they are able to gain control over the buying process as well as supply chain process. This model has developed over a period of time.

Different Modes of Market Entry for International Retailers International Retailing industry being one of the most modern phenomenon, has been the subject of study by various academicians in Europe, US and in Asia. The entire community has put forth several theories supporting the reasons for Companies to set up International Retail operations. In any international business, the market conditions in the foreign market as well as the political, economic and social environments and their stability happens to be the common factors that shape the expansion strategies of the Companies. In case of international retail business, there are several more complexities including local culture and outlook of people coupled with lifestyle as well as the existence of supplier network that plays an important role in the business plans. While the international retail Companies choose to expand their operations across foreign markets, they do so as a part of their strategic growth plans. However the methodology adopted for making the entry into the market is dependent upon several factors including the strategy as well as the foreign market conditions as described above. The retailers internal expertise and management capability coupled with the amount of financial exposure that the Company wishes to have as well as the kind of control that the Company wishes to exert in the foreign operations decide the entry mode and strategy of International Retailers. Generally the industry talks of five modes of market entry as practiced by the International Retailers. 1. Non Controlling Interest This approach is generally practised by Companies in their initial stages of expansion. When they do not have extensive experience in setting up international operations and when there is a lack of sufficient market intelligence as well as understanding of the foreign market, the international retailer might choose to invest in an established business in the foreign market and acquire a minority stake with no direct control over the management and operations. 2. Setting up International stores as a part of internal expansion This is the approach followed typically by the designer brands and fashion labels. Under this method the Companies choose to open one or two stores in significant market places abroad depending upon the attractiveness of the growing market. By opening a showroom for its brand, it is able to create and promote its brand as well as use the opportunity to limit its exposure to risk and get a first hand feel of the market. Such companies look at the foreign

stores as a part of internal company expansion and use it to train and build resources to manage international operations. 3. Merger or Takeover Under this model, the Company is able to buy out a local company in the foreign market and gain instant access to the markets and the sales network. It enables the companies to take over existing business and transfer the technology, operational processes and controls in place within a short period of time. In this case the Company is investing a lot of capital in terms of investments. Such a model can be adapted by Companies only when they have sufficient firsthand knowledge of the market and are clear about their strategic options. In affect the Company chooses to buy out existing infrastructure, network and resources already established and convert it into the new brand as desired with least amount of time and thus gain a larger footprint in the market within a short time. 4. Franchise Model This model of business has been the most favoured model with the majority of international fashion brands. Under this model, the International retailer engages a local business partner in the foreign market under franchise agreement. Under the said agreement the franchisee is provided with the foreign brand and the marketing formats and ideas for product, brand promotion and sales are guided as per the parent company. The success of the franchisee model is dependent upon the success in engaging the right partner who is interested in growing the business and is able to project the brand as desired as well as the relationship management between the two entities. 5. Joint Venture In markets where there exist suitable trade partners who are established and made a mark for themselves, the International Retailer might choose to enter into a Joint venture which works in both the parties favour. The foreign brand is able to access and leverage on the local companies presence and reputation while the local company is able to expand its business and product portfolio based on the brand name of the foreign brand. The nature of JVs varies from case to case. The long term success of this format is dependent upon the relationship of the two parties as well as the business objectives and vision and financial strength of both the parties. Successful JVs are far and few and in most cases after a few years in business the partners tend to grow apart and end their JV for various reasons. Apart from the above five modes of internationalisation adapted by International Retailers, there also exists the concept of wholesaling in fashion retail. Under this method the international retailers engaged agents or representatives in foreign markets who act as booking agents or commission agents to source retailers and stockists. In reality, the International Retailers may choose any one of the above or a combination of the above methods to make their entry into the foreign markets, keeping in view of the market realities and environment of the market in the proposed foreign country.

International Retailer Classification In todays world if internet and communication boundary has erased geographical boundaries, international retailing has brought the world market to the local store near you. Any international brand of fashion or product that you desire can be easily found in the city in your country. The rapid urbanisation, globalisation coupled with economic freedom enjoyed by the youth has helped fuel their ambition and dreams to live a lifestyle that is global and stylish. Thus the international brands and retailers are in for a good time expanding their operations in international markets all over the world. When one refers to International Retailing, the term denotes a variety of fashion retailers as well as luxury brand retails and general grocery and merchandise retailers as well. Going into the details of what constitutes International fashion Retailing provides us with the following categories of fashion retailing: 1. Product Fashion Retailers The retailers who focus on a narrow product range and cater to a particular customer group are categorised into Product fashion retailers. The brands like Nike, Reebok, Puma who cater to Sports Shoes or Jockey who cater to Mens inner garments etc fall under this category. The customer group may be specific to childrens garments, mens shoes, womens lingerie or such specific sectors. 2. Fashion Design Retailers Fashion firms that promote their brand or label and merchandise the exclusive creations of designers who sell by their name through Company owned exclusive boutiques come under this category of international retailers. Such fashion designers normally take part in the fashion shows and unveil their creations at such industry marked events. Gucci, Channel, Prada, Giorgio Armani, Diesel etc are the well known designer owned brands under this group. 3. Merchandise Retailers The department stores that engage in fashion retailing as well as general merchandise retailing of different brands and multi products are covered under this category. Departmental stores like Marks & Spenser as well as Dunnes store etc that sell general merchandise and assorted products along with fashion and accessories can be grouped under Merchandise retailers. 4. General fashion retailers This group is categorised by the international fashion brands that sell a variety of products under the brand and have extended their product variety under the brand. GAP, Mango, Hugo Boss and JC Penny are some of the fashion labels who have strong brand identity as well as product mix aimed at particular customer segment.

With opening up of new markets as well as globalisation, the complexities faced by the International retailers in terms of the standardisation, quality and new fashion trends as well as new product mix is increasing. Brand promotion and positioning too is undergoing a lot of changes in the face of technology and media being the change agents. The trends in the markets as far as the perception of style and fashion is fast changing. In keeping up with business realities and confronted with need for expansion, new International Retail formats can be expected to emerge pushing the fashion boundaries further and to new frontiers.