5 Ways Retailers Can Avoid the Pitfalls of Expanding Abroad

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1. CROSS BORDERS, CAREFULLY: An expansion outside the relative comfort zone of the United States takes a great deal of study, patience and planning. Most foreign retailers that expand into the U.S. spend 12-24 months on research and due diligence before they even consider possible sites for their stores. U.S. retailers who want to cross borders would be wise to adopt a similar strategy. Don’t rush the process, carefully vet opportunities and consider attending MAPIC in November and ICSC Euro conferences to get a better sense of the markets abroad.

2. DIFFERENT STROKES FOR DIFFERENT FOLKS: While Europe and the United States are relatively the same size, their consumer demographics and unique psychographics differ greatly. Europe is comprised of 50 countries, with almost as many different languages and niche cultures. Use qualified advisors to study the markets and understand these consumers. If done right, international stores can extend the life of a retailer’s current products. An established product in the U.S., one that’s become ‘invisible’ on the shelf, can be a hot new item across the pond.

3. DON’T UNDERESTIMATE THE COMPETITION: You’d be remiss to assume you have no competitors in the international market. Many foreign retailers and marketers are great mimics – if there is a new concept that is working in the U.S., they are studying it and trying to figure out how to modify it for their market.

4. REAL ESTATE DOESN’T TRANSLATE: U.S. retailers face huge hurdles understanding lease terms abroad, where leases are far different than the typical 10+ year deals to which they’re accustomed. In most Asian countries, leases are three years with a three-year option, and in Europe, leases can be all over the board from as few as three years up to 20. As outlandish as that sounds to a U.S. retailer, navigating the operating nuances of foreign markets and comprehending the unique language of lease terms is becoming increasingly easier for them. U.S. retailers, like American Eagle and Forever 21, are gradually operating their stores directly, rather than partnering with a local firm, allowing for brand control and increased profitability.

5. WE’RE NOT IN KANSAS ANYMORE, TOTO: Unlike the relatively standardized legal, tax and HR laws in the U.S., each country in Asia and Europe can have very different regulations despite their close proximity. Retailers must understand the important variances of employment laws, tax laws and VAT by hiring a multi-national law firm to be part of the expansion team from the beginning. Good advice is never expensive!

By: Michael Hirschfeld, EVP of National Retail Tenant Services, JLLHirschfeld, Michael

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