U.S. merchants slow to join global market

Opportunity: The race is on for sales in emerging markets, and domestic retailers are trailing.


January 20, 2000|By Lorraine Mirabella | Lorraine Mirabella,SUN STAFF

NEW YORK -- As technology shrinks the planet and emerging economies make up more of the global market, the nation's retailers need to look outside the United States for growth.

But U.S. retailers are behind their international counterparts in going global, researchers said this week at a national conference of retailers.

"Domestic opportunities are going to top out," said Phillip H. Kowalczyk, national director of strategy services for Kurt Salmon Associates. "Ignoring globalization is like turning a blind eye to the Internet. The gate is open and the race is on."

Emerging markets now make up 44 percent of the world market, and the Internet has boosted access to and demand for products from all over the world, Kowalczyk said.

But the retail industry is behind others in tapping the global market, with international sales for the world's top five retailers making up less than 5 percent of total sales, Kowalczyk said at the National Retail Federation conference. Most global retailers are European, he said.

U.S. retailers have not seen a need to expand internationally because of generally strong performances domestically, said Bill Andersen, chief merchandising officer for Carrefour, a French operator of hypermarkets and discount stores in France, Spain, Argentina and Taiwan and the world's second-largest retailer after Wal-Mart Stores Inc. The retailer has succeeded across international boundaries in part by aggressively sharing best practices from nation to nation, he said.

Globalization "is more talked about than practiced," said Andersen, an American retail executive hired by the French company last year. The perception is "there's not a dying need to expand globally."

For Liz Claiborne Inc., "It has not been a priority," acknowledged Paul Charron, chairman of the board and chief executive officer of Liz Claiborne, which has a limited international presence. "We've focused our efforts elsewhere. Opportunities were elsewhere."

Kowalczyk cautioned that retailers need to build a solid customer base and a strong brand in the United States and begin developing contacts in targeted locations before attempting to grow globally. Even then, companies would be mistaken to assume that domestic success will translate similarly in countries with different cultures, shopping habits and infrastructures.

A research index developed by Kurt Salmon Associates showed that consumers in the United States, Western Europe, Japan and India had vastly different expectations in areas of service, products and price -- with Americans most demanding and consumers in India least demanding.

Value had a different meaning for consumers in different cultures. For instance, consumers in the Czech Republic were leery of price reductions at Kmart, which in their view meant a sale of old merchandise, Kowalczyk said.

And consumers had varying expectations of service, too. A retailer offering valet parking in Germany left shoppers there unimpressed, as German consumers tend to value efficiency over creature comforts, he said.

Cultural differences present some of the biggest challenges. Other hurdles include the extremely limited availability of real estate in parts of Europe, trade structures that vary across jurisdictions and a resistance to changing shopping behaviors, said retailers with a global presence.

Sara Lee Branded Apparel Europe, the hosiery and intimate apparel division of Sara Lee Corp., had strong sales of hosiery in Russia, but saw those sales suddenly plummet in 1998, said Lee Chaden, a senior vice president of Sara Lee Corp., which gets about 40 percent of its sales and profits from outside the United States.

"Strong brands take years to build," Chaden said. "Patience is a virtue."

Retailers who have been most successful have offered a unique concept that was lacking, such as Carrefour and McDonald's, Chaden said. Others, such as Polo/Ralph Lauren, are getting into some international markets more as a way to protect their brand than to reap huge sales, said Doug Williams, president of international business development for Polo.

Jay Walker, founder of Priceline.com, the Internet site that allows shoppers to name their price on travel services and groceries, said he expects international expansion to play an important role in the company's development. But he said having an entertaining site will be a more important driver of growth internationally than convenience or price.

Charron said Liz Claiborne has had mixed success selling its brands in international markets and is working with partners in Japan.

"It takes time, dollars and resources," Charron said. "International is not the panacea for domestic ills. We have a lot of opportunities. We also have a lot of work to do."

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