Battle for growth in clothing retail goes global with record online expansion
Geographic borders are being broken down in clothing retail by an increase in the number of brands launching into new countries through online offerings.
Whilst this is a great opportunity for under pressure retailers, competition will become tougher, finds Verdict.
Research* by the independent retail analyst has revealed that although moving into new countries offers an increased customer base, retailers should think carefully about their strategy to ensure they have the basics in place, if they are to stand a chance of competing with local retailers.
Natalia Grabov, analyst at Verdict, said: “Retailers are employing different strategies to enter a new market. One of which is to launch their existing ecommerce website in new markets. This is a cost effective way of exploring the market and understand demand before promoting heavily. This can then be followed by a physical store or a localized website.
“However, unless they invest in some essential basics, there is a risk of developing a poor reputation before the retailer has a chance to formally launch. Ultimately a bad experience on a site can stay with a shopper for a long time, even if a retailer later makes up for it.”
Verdict believes that one of these basics is ensuring that the information that is vital to customers is easy for shoppers to find. For example if the retailer only has one global site, they need to ensure sizing details, and delivery information is displayed clearly. Also promoting delivery destinations is vital to ensure sales from multiple countries. For example the Topshop site has a banner on its homepage with a clear link to a table listing every delivery destination.
However, retailers can benefit further from launching localized online stores. Although this is a more costly strategy for retailers, it has its advantages. If the site isn’t local it makes keeping shoppers happy harder due to a number of reasons, including logistical issues. For example UK based retailer Next, doesn’t have any physical stand alone stores in the US so shoppers have to return items by post and as they have a very limited time frame to do this, as well as the cost involved, the retailer has to work harder to ensure shoppers aren’t put off.
One retailer which has ensured it launches into new markets using localized stores is Japanese company Fast Retailing. The retailer owns a number of brands including Uniqlo and there is a physical store in each of the countries where the brand has an online store. Importantly, each market has its own web domain and only delivers within that country. Although we expect Uniqlo to extend its shipping service from the UK site to mainland Europe, this will correspond with its plans to open physical stores there.
Ms Grabov added: “Uniqlo’s strategy is undoubtedly more costly than launching online only stores first in a new country. However, it has its rewards as it is able to tailor its online store to that specific market and, more importantly, it will allow Uniqlo to complement its online store operations with its physical stores.
“Over the next year we will see more retailers pushing into new markets and the different strategies they use will be vital in ensuring they are able to compete with the retailers in the local markets. Essentially in the online space it is all about speed, so those who can get into new markets without compromising their service will reap the rewards.”
