International Retailing Dana-Nicoleta Lascu Chapter 12

Chapter Objectives Provide an overview and description of the general merchandise retailing category and offer examples and illustrations. Provide an overview and description of the food retailing category and offer examples and illustrations. Provide an overview and description of the nonstore retailing category and offer examples and illustrations. Address issues related to international legislation and taxation and retailing practices around the world.

International Retailing Defined International retailing is defined as all the activities involved in selling products and services to final international consumers for their personal consumption. It involves operations of international retailers beyond home-country borders, along with operations of local retailers in different countries worldwide.

Internationalization of Retailing Retailers are rapidly expanding internationally in order to: gain competitive advantage. increase sales. increase profits. improve overall firm performance. As they expand internationally, retailers can take advantage of cost savings and learn from experiences in a way that could further enhance home-country operations.

Top 10 Global Retailers Rank Country of Origin Retailers Format Sales (US$ millions) 1 U.S. Wal-Mart Discount, Hyper/Supermarket, Superstore, Warehouse 312,427 2 France Carrefour Cash & Carry, Convenience, Discount, Hyper/supermarket, Specialty, 92,778 3 Home Depot DIY, Specialty 81,511 4 Germany Metro Cash & Carry, Department, DIY, Hypermarket, Specialty, Superstore 69,134 5 U.K. Tesco Convenience, Department Hypermarket, Supermarket, Superstore 68,866 6 Kroger Convenience, Discount, Specialty, Supermarket, Warehouse 60,553 7 Target Department, Discount, Superstore 52,620 8 Costco 51,862 9 Sears Department, Specialty, Mail, E-commerce 49,124 10 Schwartz Discount, Hypermarket, Supercenter/Superstore 45,891 Source: “2007 Global Powers of Retailing,” January 2007, www.stores.org.

Retail Formats: Specialty Specialty Stores Retailers offering a narrow product line and wide assortment. Examples: Virgin Records (music products) Mango (youth fashion) Specialized Markets Markets that house stores specializing in a particular product category. Jade market, Hong Kong Covered bazaar, Istanbul

Retail Formats: Department Stores Offer a broad variety of goods and wide assortments. Developments: U.S. and Canada – recent substantial losses. Europe – expansion of national chains throughout the European Union. Asia – on the decline. Galeries Lafayette is a popular French department store

Retail Formats: General Merchandise Discount Stores Characteristics: Sell high volumes of merchandise Offer limited service Charge lower prices Types: All-purpose – offer wide variety of merchandise and limited depth. Example: Wal-Mart. Category specialists (category killers) – carry a narrow variety of merchandise and offer a wide assortment. Example: Home Depot, Toys R Us.

Retail Formats: Off-Price Retailers Characteristics: Sell brand name and designer merchandise at below regular retail prices. Overruns, irregular products, previous seasons’ products. Examples: Factory outlet stores. Close-out retailers (broad, inconsistent assortments). Increasingly popular internationally. Single-price retailers (all products for the same price).

Retail Formats: Catalog Showrooms Offer high-turnover, brand name goods at discount prices. Internationally, however, goods sold through this venue tend not to be brand name, but, rather, goods that have not sold the previous season through the catalog. Example: IKEA is probably the most successful of these store formats internationally.

International Food Retailers Conventional Supermarkets Self-service retailers with annual sales higher than $2 million and less than 20,000 square feet of store space. Conventional supermarkets abound worldwide. Superstores Combination stores (food and drug). Hypermarkets – combine supermarket, discount, and warehouse retailing. International examples: Tesco Extra.

International Food Retailers (contd.) Warehouse Clubs (Wholesale Clubs) Require members to pay an annual fee. Operate in low-overhead, warehouse-type facilities. Offer limited lines of brand-name and dealer-brand merchandise at a substantial discount. U.S. clubs are rapidly expanding – among them are Costco and Sam’s Club. International competitors are particularly aggressive: Metro is expanding worldwide. Membership requirements are more stringent than in the U.S., however, membership cards have a high “pass-along rate.”

International Food Retailers (contd.) Convenience Stores Small residential retailers or retail chains consisting of small neighborhood stores. Open long hours. One-stop shopping. Carry limited lines of higher-turnover necessities. The merchandise mix varies from country to country, as necessities differ. In Eastern Europe, many convenience stores are present under the form of kiosks, and may care scrambled merchandising ranging from eggs and coffee to whiskey and vodka.

Nonstore Retailing Internet Retailing Also known as interactive home shopping or electronic retailing. The use of the Internet as a venue for selling merchandise is practiced both by dot-com companies, as well as traditional retailers attempting additional market penetration. Access to international markets is facilitated by the Internet.

Nonstore Retailing (contd.) Vending machines Increasing in popularity. Technology is facilitating an interactive consumer experience. Different formats worldwide (especially popular in Japan). Vending machines are omnipresent in Japan.

Nonstore Retailing (contd.) Television Home Shopping A venue for selling merchandise to consumers in their homes using cable channels. Examples: infomercials and direct response advertising. Popular in North America and Europe, and becoming increasingly popular in Asian markets. Catalog Retailing and Direct Mail Retailing Venues for selling merchandise to consumers using catalogs and other types of direct mail. It allows for the international expansion of retailers. Must be adapted to local market needs and practices.

Nonstore Retailing (contd.) Direct Selling A retailing venue whereby a salesperson, typically an independent distributor, contacts a consumer, demonstrates product use and benefits, takes orders and delivers the merchandise. Direct selling firms are most active in the growth markets of Southeast Asia, Central and Eastern Europe, and Latin America. Due to the negative publicity surrounding direct selling practices, China first banned, but, subsequently reconsidered allowing direct selling operations, but with tight regulations.

Network Marketing Variation on direct selling. Involves signing up sales representatives to go into business for themselves with minimal start-up capital and sell more "distributorships" and merchandise. Network marketing is growing rapidly, especially in emerging markets. International examples: Amway, Herbal Life.

Issues in International Retailing Legislation and Regulation Local governmental regulations differ from one market to another. Taxation and Cross-Border Shopping This practice is common in countries where consumers are charged lower duties for products they purchase from a neighboring country. Consumers' purchase decisions are driven by tax differences, rather than by differences in producer prices. Cross-border shopping may cause reduced profits for domestic retailers.

Issues in International Retailing (contd.) Variation in Retail Practices: A Consumer Perspective Retail practices vary from one market to another depending on culture and market preferences. Example: In the U.S. consumers purchase products in bulk and less frequently. In Japan and Europe, consumers purchase products in smaller quantities and on a daily basis. Variation in Retail Practices: Salespeople and Management Sales service differs from market to market, ranging from extremely friendly to curt salespeople. Some stores can charge an entrance fee for people shopping there, while other stores require a particular dress code of their customers.

Chapter Summary Described general merchandise retailing. Addressed the food retailing category. Discussed the non-store retailing category. Addressed issues related to legislation and taxation. Provided an overview of retailing practices around the world.