What are the risks when introducing a product to a new market?
Even if a product’s been successful elsewhere in the world, there are always risks introducing it to a new market. The UK is a very crowded and competitive market. It’s very advanced and among the best in the world, making it very difficult to crack unless you are an exceptionally good business with a unique offer.
Let’s take fashion as an example. In a piece by Drapersonline.com, independent retail analyst Richard Hyman comments that ‘the UK fashion market is the toughest in the world, so if you’re coming over here, you need to offer something different. A lot of retailers don’t understand that. Retailing isn’t a business that easily crosses borders. It’s all about brand relationships and retailers have to work very hard to build that relationship with their customer in their home market. When they go to a different country, they are back to square one and many aren’t willing to invest the time and resource needed to build the brand in new territories.” Let’s look at some examples…
Gap’s Banana Republic
… Had to close eight of its UK stores at the end of 2016, after only 8 years in the UK market. Analysts claimed it was the retailer’s poor pricing and promotion strategy which led to its failure in the UK, with the brand failing to justify its premium price points, leaving consumers with little encouragement to shift their spend from rivals.
Let’s reverse an example as it works the other way, too: a British brand launching in Australia. In 2011, Topshop launched its Australian operations; however, the dynamics of the Australian retail market weren’t understood by Topshop, which led to its demise down under. In mid-2017, Topshop’s Australian operations went into voluntary administration. With H&M, Zara and Uniqlo to compete with, the fashion brand’s combination of demographics and affordability proved to be a big problem. With urban rents in Australia being some of the highest in the world, Topshop opened shop at these most expensive locations. This happened at a time when Topshop made massive investment in its e-commerce business, which meant it was running on high rentals with high operation costs. Poor stock levels also didn’t help, with a lot of potential customers struggling to find items such as jeans in common sizes.