Comment: Global retail expansion needs a localised touch

Two leading figures in global grocery used this week’s World Retail Congress to declare that the “age of imperialism” in international retailing was over. Quite aside from the negative connotations of the language, this view of the continued globalisation of the retail industry asks some big questions about future expansion strategies.

“International globalisation is very expensive,” said Carrefour boss Georges Plassat. “When you go into lots of markets at the same time you are never able to dominate the accumulation of competitors you are facing.”

The lure of overseas markets remains strong for British retailers. In a report earlier in the year, Retail Week estimated the top 50 British retailers operating abroad now generate more than £40bn in sales overseas. And Ted Baker was another high-profile name setting out further ambitions abroad last week, when chief executive Ray Kelvin said he could see the quirky fashion retailer owning hundreds of stores in China.

But the comments by Plassat and the chairman of Tesco’s South Korean Homeplus business, SH Lee - who said many “imperialists” in South Korea fold by failing to understand the market - are the latest examples of a level of realism taking the gloss off the international dream.

Fears of a slowdown in China - where a number of observers believe the economy will grow only 7.5% this year, the slowest rate since the 1990s - are at the root of many of the concerns. But some high-profile exits from various overseas markets from the likes of Tesco, Home Retail and Carrefour have demonstrated the ongoing challenges of life as a global retailer.

But an end to ‘imperialism’ or, in more practical language, a ‘one-size-fits-all’ approach to global retailing, does not precipitate an end to international ambition. However, it does suppose a slower and more deliberate approach to expansion.

Most importantly, for a sector that obsesses about the needs and behaviours of its domestic customers, it should come as no surprise that both Plassat and Lee argued it was essential to be integrated locally, with the detailed understanding of consumers and markets that brings.

But even localisation is no guarantee of success, as Walmart demonstrated this week after dissolving its joint venture with Indian partner Bharti Enterprises.

However, the rewards remain considerable for global expansion - retailers just need to explore new territories with even more vigour first.