5 Things a Local Partner Provides When Taking a Brand Global
Internationalizing is a daunting task for a brand looking to expand beyond its domestic territory. Partnering with a local company eases the process of entering a new market and conducting daily operations once established. Regardless of past reputation and assets, multimillion dollar mistakes and losses can occur without a strong local partner.
In 2006, for example, a leading multichannel consumer electronics retailer from the United States acquired China's fourth-largest appliance and consumer electronics retailer for $180 million and embarked on a campaign to spread into the Chinese market. Within a year, the American retailer opened its first store in Shanghai. Nine other stores opened over the course of 2007-2011. By February 2011, all of the stores were permanently closed.
Likewise, an American toy brand with an iconic history and devout customer base domestically had its sights set on expanding into China. In 2009, the brand opened its first global flagship store in Shanghai. After staking $30 million into the Shanghai location, the store closed its doors after only two years in business.
With big investments come huge risks. To mitigate issues that would undermine efforts to expand globally, partnering with a local company can provide the following:
1. Knowledge: Business practices vary from country to country. The same techniques that work in the U.S. won't necessarily yield the same results in Norway. A local partner that possesses detailed knowledge of local culture, consumers, B-to-B and B-to-C practices, and unspoken rules of conduct will help avoid lost-in-translation miscommunication, faux pas, poor performance and eventual premature closure. Partnering with a company that already has established relationships and a business footprint is beneficial to penetrating a market by unburdening the task of developing local business connections that can be critical to success.
2. Channels: A partner provides a comprehensive B-to-B and B-to-C market entry concept. Partners are able to support opening monobrand stores and aligning with similar local stores to develop shop-in-shop projects. Management and training for staff can be conducted by the local company for both stores. If a brand isn't pursuing brick-and-mortar shops, a partner can help identify and negotiate with local distributors, retailers, shopping malls and department stores to carry the brand's products. To further minimize risk, the local partner is the only contractual party in these relationships.