Retailers and International Markets: Motives for Expansion
University of Edinburgh, Edinburgh, UK International retailing is not a new phenomenon. The Woolworths operation, for example, was introduced into the United Kingdom from the United States in the first decade of the twentieth century. Neither is international retailing limited to a few countries; many of Europe's leading retailers have multinational interests. The French group Carrefour has operations in other European countries and South America. Vendex, based in the Netherlands, has interests around the world, as does the UK's Marks & Spencer with its European, Canadian, US and Far East operations. Nevertheless, it would not be an exaggeration to say that retailers have often shown a reluctance to establish themselves on foreign soil. The US has been a hot-house of retail innovation, but US retailers have not been particularly inclined to transport innovations themselves: instead, local retailers have adopted them and integrated them into their national retail system. Retailing has retained its national characteristics. One reason for retailers having been contained within national boundaries is the inherent traditionalism of national retail systems, so that innovation has had to be sensitised to the peculiarities of different cultures. Another major reason has been the size of retail organisations. Retail systems have been dominated by the small entrepreneur. However, conditions have changed. European retailing has seen the emergence of large organisations and hence increasing concentration in retail markets. There has therefore been a rapid growth in the number of retailers capable of sustaining international operations and addressing the cultural issues of foreign market penetration. Many large retailers have already internationalised their operations and it is likely that an increasingly large number will do so. The motives for expansion have not, however, received much attention. Why Expand Internationally? Why do retailers invest in foreign markets? Two immediate answers are saturation in the home market and the desire to export a particular retail offering which will occupy an as yet unfilled niche in a foreign market. Both White (1984) and de Somogyi (1986) have emphasised these two motivating factors, and they certainly provide useful foci for discussion. Undoubtedly, saturation of the home market has led to foreign investment. Saturation may be either in one retail sector or more than one retail sector where a strategy of diversification has been used to achieve growth when the retailer's core activity has already reached saturation point. Therefore, saturation may be such that the retailer concerned has not only achieved saturation in terms of its primary activity, but also reached saturation as far as its diversified activities are concerned. However, saturation levels are determined as much by market
Retailers and International Markets
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size as by regulatory bodies. The Dutch retailer Vendex International and the Belgian retailer GB-Inno-BM are prime examples of operations in relatively small home markets that have expanded internationally because of both market and regulatory constraints. In the case of GB-Inno-BM, Belgium'sloide cadenas has restricted expansion of large retail operations (Knee and Walters, 1985). Amongst UK retailers, Marks & Spencer is a good example of an operation with a comprehensive national coverage which has internationalised its operation. The export of particular retail offerings may also be seen as a prime motivation. The French hypermarket retailer Carrefour and the Swedish furniture retailer IKEA fall into this category. These operations are distinct and fill a particular market niche, as does the UK multinational Laura Ashley. These are three retail operations with different merchandise and formats yet they all provide a distinct and innovative...
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