4 Best Practices for Retailers Entering Emerging International Markets
The world's largest online retailer is testing unmanned drones in the United States and piloting a project with India's postal service, both for streamlining order delivery. If there ever was a metaphor for the comparative challenges of retailing between developed and emerging economies, this has to be it.
Another challenge is that emerging markets, whether in Asia, Latin America, Africa or Eastern Europe, defy all attempts at taxonomy. What works in one market may not even be remotely relevant to another. The sheer diversity of profiles, characteristics and dynamics makes it virtually impossible to compile a shopping list of best practices that global retailers can leverage across markets. However, there are some fundamentally relevant factors that retailers must consider in order to succeed in emerging economies. Here they are:
1. Brace for the voids. In most emerging markets, the retail value chain is still in a nascent phase. This means that key links along the chain — e.g., logistics, payment infrastructures, talent, etc. — will either be inadequately developed or outright missing. Even the best honed business strategies can disappear into these institutional voids, making it imperative for retailers to invest in identifying, understanding and addressing these gaps. Where possible, retailers can structure their strategies around the void. But if business-critical components in the supply chain, for example, are lacking, then they'll need to develop competencies and/or partnerships to rectify the situation.
2. Small is the new black. Consumer spending trends are driving even large global retailers in developed markets to think smaller format stores. In post-recessionary times, disposable incomes shrink and consumers tend to abstain from stockpiling essentials. Additionally, emerging market consumers may not perceive adequate payoff, in terms of time, money and effort, in driving to suburban big-box stores in spite of the lower prices.