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Two key themes emerged from this month’s Shop.org seminar, Going Global: Merchandising for an Overseas Customer: 1) make sure that differences in international consumer behavior drive international merchandising strategies and 2) ensure that a well- defined, yet flexible org structure facilitates the division of labor between corporate and local countries/market teams.
Angela Kapp, Sr. VP – CRM & New Initiatives, The Estee Lauder Companies highlighted numerous examples of how consumer behaviors differ in respective global markets and showed how incorporating these differences into international merchandising plans can help shape successful brand strategies.
George Hanson, Sr. Manager of International Strategy at Lands’ End, emphasized the need for global collaborative planning and organizational alignment as the foundation of a successful international e-commerce expansion strategy.
Hanson also cautioned internationally-ambitious online merchants to resist their natural instinct to run.
Instead they must balance the desire to run fast with the need for an organizational structure that balances corporate and local market expertise. By dedicating the time and resources necessary to align international organizations, retailers can build international merchandising and assortment plans that are more measurable and more easily adjusted as the business evolves.
Context Drives Expectations
Angela Kapp discussed how differences in global consumers affect brand expectations in different markets. She mentioned that during her first trip to China five years ago, she noticed very few women wearing make-up. Yet in France, women have worn make-up for ages.
She advised getting to know the consumer in different markets by using online surveys and market research to better understand unique consumer expectations. By researching the context of a market (e.g. is service imperative or an after-thought?) brands can better understand how to position a product category accordingly and how to align merchandise with the consumers’ desire for the product.
She added that one should anticipate learning that some consumers will want to be told what to buy and some want to make their own choices.
Successful pricing strategies must also blend an understanding of market context and consumer expectations. For instance, Kapp pointed to the differences between pricing expectations in Asia. In Taiwan “it is all about the deal” whereas in Japan price is highly correlated to quality.
Objectives First. Then Channels.
For brands pursuing international e-commerce expansion, it is important to first establish and prioritize objectives for your digital strategy. Ask: Are we focused primarily on brand engagement? Will the online channel be complementary to our other channels? Or is the real priority to satisfy our retail partners?
For global brands new to international e-commerce, Kapp suggested that they should try mini-sites and/or test marketing sites prior to committing to an e-commerce build-out. In some cases this approach will offer more learnings more quickly than a “passive distribution” approach, which according to the J.C. Williams Group model means fulfilling international orders with little or no strategic planning or investment in the channel.
Kapp stressed that adding an e-commerce operation as a new channel of distribution is NOT the way to solve a brand’s problems. Smart brands get the brand positioning right first and then engage consumers. After correctly positioning the brand among consumers, the next step is figuring out which channel makes the most sense.
Kapp’s closing point ─ the importance of having a clear strategy before building an e-commerce channel because resources will always be constrained ─ was a perfect set-up for George Hanson’s insights and suggestions.
The Global Balancing Act
Hanson prefaced his comments by stressing that organizational structure ultimately impacts the success of international merchandising. Although planning collaboration is never finished, or as Hanson put it, “never optimized,” Lands’ End’s headquarters and its local in-country offices work very collaboratively and are always looking for the balance required for a 50/50 partnership.
One area where the balanced approach is paying dividends involves overcoming localization challenges. As we alluded to in a previous update on the JCWG study, overcoming localization barriers can consume significant organizational focus, especially regarding localizing marketing operations without departing from the brand.
Hanson stressed that appropriately leveraging local market knowledge is a key barrier to international expansion. His team has found that establishing local expertise with native in-country talent is the way to go. Along the way, Land’s End has found expats from corporate to be valuable (especially for the launch period), but Hanson advised retailers that expat input should be temporary.
Direct Collaboration: Us vs. Them Doesn’t Work
Given that Land’s End is a direct business, the creative elements of merchandising are very important, because the creative invites customers to interact with the brand. Allocating creative control has been a key issue with the debate often revolving around determining the right mix of exporting the brand vs. supporting the unique needs for an international market.
Hanson touched on the importance of balanced collaboration by explaining that Lands’ End approach has evolved over the years. The company has found that what works best prior to launching a product line is “all of us getting together and developing a global assortment strategy [and] at the end of the day we all agree on key themes and merchandise directions.”
Typically some themes need to be localized, but other directions, especially those unique to a market, are best left to the discretion of the local teams. For instance, the “creative” balance that works for Lands’ End is where locals drive marketing while corporate focuses on establishing brand standards and providing guidance. When it comes to getting alignment on global merchandising assortment plans, especially for market specific products, it is crucial to let locals weigh in with the criteria.
In summary, Hanson offered the following take-aways:
- Executive leadership is critical for driving international growth.
- Balance the need to run fast with building the org structure to support the trek.
- Go native as quickly as possible when launching in a new country—locals know best.
- Due diligence is critical for new country entry— market, competition, legal, payment methods, and partnerships all need time and attention.
- Establish brand standards and a collaborative working culture.
- Align incentives and let the countries drive— and try not to get in the way.
A Quick Thanks to …
As we head towards the release of the international e-commerce benchmarking study September 23rd at 3PM at the Annual Summit, the J.C. Williams Group would like to thank all the senior executives who joined us in the study, the international solution specialists who participated in workshops and briefing calls, our friends in the analyst community, the Shop.org team and of course, our sponsors, Access Technology Solutions and SafetyPay.
Thanks as well to Angela and George for sharing their experiences and insights with us. If you’re interested in hearing more from them, Shop.org members can replay the webinar on demand.
Thanks,
The J. C. Williams Group
