4 Best Practices for Retailers Entering Emerging International Markets
For retailers, small formats, in both emerging and developed markets, represent an opportunity to get closer to their customers. Smaller formats can also help retailers channel their investments into more locations to maximize reach. Though a straightforward per square foot rental and development cost calculation may not skew favorably towards urban locations, the potential for higher traffic can put those investments in the black. For all this to work, however, it will have to be backed by a strategic approach to site selection, category/assortment and customer experience.
3. Location's good; loyalty's better. Emerging market consumers are among the most price sensitive in the world, yet value is the final arbiter in their retail relationships. According to a recent study, customers in emerging market geographies like Asia-Pacific, Africa and Latin America were most inclined to choose retailers that offered loyalty programs. The same study emphasized that the loyalty program penetration in these geographies, especially Latin America and Africa, was significantly lower than that in developed markets.
In emerging markets, loyalty programs and focus on customer satisfaction have the potential to build more mutually productive engagement models than lower prices alone. For example, interest-free credit and free delivery can perhaps be integral parts of a loyalty reward program. Conveniences like a three-day return policy are likely to be great hits, too.
4. Localize. Global retailers need to understand that the product and service standards they ultimately have to beat are those set by local retailers. Those are the competitors with long-standing customer relationships rooted in cultural and consumer knowledge, generations of loyalty and an unflinching focus on service. Retailers need to invest in deconstructing the nuances of local culture and consumption to create a product offering that's relevant in terms of price, pack size and preference. In many emerging markets, local retailers have built a service model that includes interest-free credit and free delivery. Chain stores may not be able to match them on these metrics, but they will surely have to explore any and all opportunities to even out the imbalance.
