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From idea to international

While international big name retailers such as H&M and Topshop are coming to our home to roost, New Zealand retailers are returning the favour and setting up shop on foreign shores. Catherine Murray finds out how it’s done.

By Catherine Murray | February 4, 2016 | News

Kiwi brands are stepping outside their local sphere of influence and taking their products to the world. With their passports stamped, brands explore new markets, partners and customers, and travel along a learning curve that reaches dizzying heights.

It’s not a new phenomenon - New Zealand brands have been leaving home for years. Some of our iconic brands have cemented themselves in overseas markets, building foundations not only for their brand, but also for our nation’s reputation.

Icebreaker is one of them. Based in Auckland, the brand has online stores, physical stores in Australia, Canada, the US, and New Zealand, and is available in more than 5000 stores in 50 countries. Talking to NZRetail back in March, Greg Smith, Icebreaker’s general manager Australia and New Zealand, said the brand’s international markets – Europe, the US, Canada, and Australia - were becoming empowered to run the business themselves, with head office offering more of a support role. Sales are expected to double in the next five years from just over $200 million in 2014.

Whether it’s bricks and mortar, ecommerce or omnichannel, global expansion provides opportunities and challenges that are not for the faint hearted. There are many that have gone before, learning lessons the hard way.

There was The Warehouse’s jump across the ditch to open the Yellow Sheds, and the relatively hasty retreat back home several years later. Troubled Pumpkin Patch is still persevering many years after leaving the bricks and mortar behind in the US and UK. Even Kathmandu has made the decision to close its four UK stores due to lack of returns and profits.

Still thinking of going global? We spoke to some retailers who’ve been there to find out what to look out for when international shores beckon.

Emma Hill. Image credit: Tristan Morris

Commitment to success – Michael Hill International

In a period spanning almost 40 years, Michael Hill International has grown from a single store in Whangarei to 302 stores spanning New Zealand, Australia, Canada, and the US.

Store number 300 was opened in August 2015 on Auckland city’s Vulcan Lane. The flagship store showcases the full Michael Hill range and the evolution of the brand.

October 2015 marked the opening of the second New York store in the Roosevelt Field shopping mall on Long Island. The Kiwi brand is in good company, rubbing shoulders with Apple, Bloomingdale’s, H&M, and Armani Exchange. The opening swiftly followed the company’s first New York store in the Queens Centre, which opened less than six months before in April 2015.

Getting to this point has been quite the ride, Emma Hill, chair of the company, says.

“It’s been a journey of vision, perseverance, continual learning and many ‘Oh my goodness’ moments along the way.”

Back in 2002, Hill launched Michael Hill International in Canada, its third market. The region is managed by Brett Halliday, who has been with the company for 21 years. He has plans to grow the 60 stores across the country to 100.

Opening a new market is incredibly challenging, Hill says. She believes deep reservoirs of perseverance and “unshakeable dogmatic belief that you will break through” are what’s needed.

Because of the incredible focus required to get new markets right, Hill says the Michael Hill International team doesn’t like to have too many on the boil at any one time.

“If you get too many new frontiers burning it costs a lot, and with the fractured executive focus you make little headway.”

The company has a mantra when it comes to new markets – controlled profitable growth.

“One of the reasons for our success in new markets is we don’t bite off more than we can chew,” Hill says. “We select no more than a handful of stores in a new country and settle in to learn the lessons we need to learn.

“I had four stores in the Vancouver region for two years and we had many things wrong with the model when we launched there. So over the two years we tinkered with the business until we got traction and a reasonable store contribution, it was only then that we hit the growth button.”

As for timing, Hill says there is no ‘right’ time to move into a new market, but she doesn’t believe it’s possible to learn as a “tourist”.

“It’s not until your feet are to the fire that you are willing and able to learn the many lessons waiting there,” Hill says.

Waiting until everything is perfect in a company’s existing markets is also impossible, she says, as perfection is never obtained. Instead, business owners should do their homework as well as possible, and have the courage to make a decision.

Hill says one of the biggest challenges faced by a business entering a new market is the ability to let go of what you know.

“I like the term ‘educated incapacity’ – what you know isn’t always what’s going on. We get very wedded to our strategies, but what made you a success back home will not always translate. The challenge is that it’s really hard to let go of what you know to be true, and it’s especially hard for the mother ship back home to let go of what they know to be true also.”

Entering a new market also involves understanding a new business environment, and to do this Michael Hill International uses staff already experienced in the company's ethos and structure.

"We see new markets with a highly trusted executive who has deep experience in our culture and our way of doing things. The mission is then to embed our culture in the new market while modifying the business model. They have to have the freedom to experiment, without feeling like they are banging their head against a brick wall every time they talk to the home office."

A different approach is needed for the US market. Hill says Darcy Harkins, who started with the company over 20 years ago in its Michael Hill Shoes era, is still unravelling the mystery of US retail. The company is still losing money in the US but Hill describes this as a “relatively small price to pay” in return for the insights its presence in the US market has yielded: “We like to think of the US as our R&D centre, and the cost of entry as the tuition fee to the world's best university."

Making a move from New Zealand to overseas brings with it the challenge of a brand getting noticed.

"New Zealand offers a unique market where we can reach our customers monthly, and get a handsome return on our marketing spend," says Hill. "Our largest competitor in the US has over 3000 stores, a heritage of over 100 years, and a massive marketing spend enabling them to dominate the media. How do you compete with that?"

It's so easy to throw money at marketing and achieve nothing, so you need to be innovative, she says.

"Creative decisions like placing our 'We're for Love' brand advert in the Super Bowl got people talking across the country, and our website hits surged as many people heard of Michael Hill for the first time."

Shoppers queue outside an ilabb kiosk.

Action stations - ilabb

Long distance relationships are not the best way to approach a brand's global expansion. For this reason, in early 2016 founder Seadon Baker will pack his bags and move to Los Angeles to establish ilabb as a leading global action sports brand.

ilabb puts a commercial twist on streetwear, focusing on collaboration with athletes, musicians, and like-minded brand partners. Its flagship store is in Auckland's Grafton, with over 100 stockists throughout New Zealand and Australia. Six international websites cater for the individual price and content needs of Europe, Canada, the US, the UK, Australia, and New Zealand.

ilabb is working on building its global expansion, starting with the US.

Baker says one of the most important steps to taking a brand global is ensuring that the team back at home in New Zealand is strong. He says that people, including himself, look at the international market and get so excited at all the opportunities - but it's important to take a moment and look inwards at the business's structure and processes.

"The biggest thing that we have taken our time with and learned through advice and experience is that before you go anywhere you must have an absolutely robust operation in terms of the structure, the team, and the people here. At the five year mark, when a lot of brands are gaining momentum, we chose to stay behind and continue to put in work to ensure we had a good structure that would allow me to ultimately leave the business and set up in the US."

Following the move to America, Baker will be returning home at least four times per year, and using the magic of technology to stay in touch with the New Zealand head office and operations teams. This year has proven a test case for the move.

Baker will take his seventh trip to the US this year. He says a lot of those trips have been to test the US market and to make sure the company functions without him in New Zealand day to day. The building blocks for the move next year are being established, he says.

In the saturated rag trade, Baker says it’s vital to carve a path for your own brand, especially in markets like the US.

"You can get caught up with the idea that you're the only one creating all this amazing product. In the US you only need to look down the road, and someone's doing it similar and [they’re] much bigger than you. You can't get caught up in thinking that you are the only one doing what you're doing.”

"This is the bit where marketing comes into play. You've got to be selling the dream with the product being, to some degree, supplement to that, as opposed to resting all your [hopes] on the product when often it could not be majorly different to anything else available in the market. It's a balancing act - you want to show off the product and present it in an awesome way, but at the same time you have to sell a dream. That is something that we have learnt.”

It's about bringing something different and unique to the space that you're in, says Baker, and that's what ilabb is doing.

"We are not trying to redefine a t-shirt or anything like that, but we're bringing a bit more of an edgy, forward look to action sports, while at the same time being commercial."

Initial work to showcase ilabb in America has included pop-up stores at action sports events. ilabb was the first New Zealand streetwear label to do an activation at the 2015 X Games, held in Austin, Texas, which attracts crowds of over 100,000 people.

For the first US pop-up store, ilabb partnered with Kiwi drift driver Mad Mike Whiddett, the brand's very first global ambassador. Whiddett has almost two million followers on Facebook.

Pop-up stores at events give brands the opportunity to be in front of core consumers, and after the event has been and gone there is then a great chance to connect digitally with customers once again, continuing to build a brand and customer relationship.

There's also a fine line between flaunting the fact that the brand is from New Zealand, and being able to show that the brand can compete and prove its value in the global marketplace, Baker says.

"To the American individual, a New Zealand brand is really awesome. If you're chatting to someone and say that ilabb's from New Zealand, and that we've developed the line there, they're blown away by the fact that we've come from the other side of the world. The reception from an individual is really cool, they want to support you and they want to become a part of it all."

"But to the mass consumer there is a certain amount of patriotism in America. You need to be able to globalise the brand, and the original nationality of it isn't as important at that point. Case in point is a brand like Adidas, which doesn't go around in America saying that they are from Europe - it promotes itself as a global brand with localised ambassadors."

Australian stores are already stocking ilabb, but by conquering the American market the brand aims to pursue the Australian market as a global brand, rather than just the little New Zealand brother trying to get into Australia.

“There is a balancing point, where you need to ensure there is a localised and global message. At our core, we are Kiwis, proud to be taking on the world creating a global action sports brand,” Baker says.

Mike Beagley, managing director, Rodd & Gunn.

Offshore adventures – Rodd & Gunn

Getting into wholesale distribution is one way of testing an international market before committing to physical bricks and mortar stores.

This is how Rodd & Gunn’s managing director, Mike Beagley, decided to trial the challenging US market.

Rodd & Gunn is well established close to home, with 23 stores in New Zealand accounting for roughly 20 percent of business, and 66 in Australia (including 31 Myer concessions) accounting for 70 percent. The remaining 10 percent is from 160 wholesale accounts in the US and Canada, plus Nordstrom and Trunk Club.

The trial worked - the company is now close to signing two deals in California in locations relatively accessible to its US head office in San Francisco. It is expected the stores will open in the first half of 2016. In October 2015, Chicago-based private equity firm Winona Capital made a minority investment in Rodd & Gunn, a move that Beagley says is more about expertise, contacts, and market understanding than pure capital.

Beagley shares some words of caution about the US market.

“I always joke that there are more days I wake up and wish I never went to the US than I do wake up I think I am glad I am there. However in saying that I think there is a huge opportunity for us to grow into a meaningful brand in the US. My first approach was if we got to 1 percent of Ralph Lauren’s sales then we would have made it but I now think the potential is much greater for us based on the progress we have made, particularly the product acceptance in diverse markets from LA to NY and Minneapolis to Dallas. Success in the USA will then give us the potential to open in other countries.”

Customers across Rodd & Gunn’s three markets, in addition to global online sales, have choices. The multichannel approach across an ecommerce store, its own physical stores in New Zealand and Australia, in addition to wholesaling in the US and Canada, offers options to customers.

Beagley likes the multichannel option as it gives customers lots of ways to get different perspectives of Rodd & Gunn. Its concessions in department stores across Australia and New Zealand have helped build its brand, especially in Australia.

Having a team present in the market is essential, Beagley says.

“We have gone from no representation, to agents to now our own dedicated sales force and the results are polarising. Having your own team ensures the message we want to deliver is, the majority of the time, delivered pitch perfect. They are our brand ambassadors. They do a huge amount of miles and every store that stocks Rodd & Gunn gets visits and in a lot of cases trunk shows that are totally about helping the retailer sell our brand.” 

If a brand is looking for a point of difference to assist in global recognition, then the fact that it’s from New Zealand could be it.

Rodd & Gunn leverages this with its ‘taste of New Zealand’ concept. By partnering with Amisfield wines and New Zealand food at events, the brand sells the total New Zealand story.

“I initially underestimated the relevance or importance of NZ as a branding message but in the US it means a lot and actually gives us cut through,” Beagley says. “We brand ourselves Rodd & Gunn New Zealand in the USA and every person we meet has positive connotations about NZ, there is never anything negative. Whilst NZ isn’t a reason for success it has amazing positive brand perceptions that assist you in your talkability, which can give you an edge.” 

Diane Foreman.

Getting a taste of your market - Diane Foreman

Diane Foreman, chair of the Emerald Group, knows the value of the New Zealand brand to the overseas markets, something that she says New Zealand Trade and Enterprise has done an ‘awesome’ job with.

“I don't think New Zealand realizes how strong the brand is. It's a sensational brand, particularly in Asia. ‘Made in NZ’ means little in NZ, but particularly for foods brands in Asia it's probably about as good as you can get.”

Emerald Group sold Emerald Foods, its ice cream manufacturing subsidiary including New Zealand Natural, in June 2015. The company has a franchised network of over 650 branded outlets in more than 24 countries.

Another aspect of going global that New Zealand doesn’t realise is that our relatively isolated location is not a barrier to global growth.

“Distance isn’t the problem it once was,” Foreman says. “It’s not hard at all if you have the right people. We are all so in touch that it doesn’t matter whether you are in Dunedin or Dubai, we are constantly connected. Freight is an issue, but this too is not as difficult as people think.”

Global markets can represent ‘the big unknown’ and Foreman says there are several ways to be prepared for anything.

Retailers should have a robust business plan and refer back to it constantly. This business plan should have spelt out what can possibly go wrong, and have answers ready for action. Foreman says for offshore businesses, communication is everything, so those in charge need to be in touch every day so there are no surprises. They should also become “addicted to the news” so that they hear about disasters such as earthquakes, riots, change in regulations, and have time to react.

The major consideration is understanding the market, Foreman says.

“As a business owner you need to be prepared to spend some time away from home, growing an offshore business – it doesn’t just happen. Make research a priority, visit the country you want to work in, and get a feeling for their culture and the competition. Talk to as many potential customers as you can, and have someone that understands the culture of your targeted country. Culture is very hard to read from the outside.”

Foreman says that the market she found most interesting, although not necessarily the most successful, was Saudi Arabia. She found the culture very different to New Zealand’s and the language barrier huge. The Saudi Arabian market wants a retail experience, not necessarily an ice cream, and it views women differently, says Foreman.

“Visiting that market taught me more than any books ever had and I am grateful for the experience of actually wearing an abaya and being invited into Saudi homes and seeing a truly different culture at work,” she says. “It was an incredible experience to visit a franchise in Saudi and see men and women lining up on different sides of the store, see graphics that were totally different (their culture demanded that there were only product shots and no people) and via an interpreter talk to customers about their perception of the product and understand what they needed from us.”

Tim Brown, Wishper founder.

The online option - Wishper

Tim Brown knows a thing or two about different cultures. The director of the online sales site Wishper lived in Huzhou, a tier four city of three million people in Northern China before his move back to Kiwi shores. It was from here he ran his ecommerce retail supply company and established a network of contacts that many a business person would envy.

Brown says that in addition to the need to be physically present in the market, it’s essential to understand what people are really saying.

“For example, no one in China says ‘No’ to anything. There are so many opportunities there that they do not want to miss one, through a lack of understanding or just because it’s a bit different. They will just keep saying ‘Yes we can do that’. What they are really saying is that they are very interested in looking into the opportunity, come over here and have a chat. You can’t take a ‘Yes’ too far in China.”

Entering a new market can be a risk, and Brown says often ecommerce can be a way to test a market. The barriers to entry for ecommerce are much lower than those for physical retail, and ecommerce can allow retailers to access other markets with a low-cost test or plan first. He recommends it as a strategy to test new markets and understand them before fully committing.

Another option, says Brown, is to use a platform such as the Alibaba Group’s Tmall Global, which is becoming many international brands’ first step into the China ecommerce market. Tmall Global is an extension of the B2C Tmall business, and enables overseas merchants to enter the online retail market in China without the need for physical operations within the mainland.

China is an incredibly complex environment. Brown says help is at hand - it’s often just a case of finding it. He says that often a brand needs to look for someone that is able to manage online sales, manage a warehouse, manage distribution, and provide reps on the ground.

“All the pieces are there, it’s just a matter of connecting them, rather than feeling like you have to do the whole thing yourself.

“When I was in China I had people saying to me that they had a big team that I could have access to and that would do all the legwork for me. I thought that the cost of it would be way too high, so I dismissed it straight away.

“It wasn’t until I went and met with them three or four times and started to understand what they could do and what the costs would be [that] I realised that we would be able to move much bigger volumes at a lower cost, I was going to get the China price instead of the foreign price, internal logistics would be cheaper, and lots of other benefits that came together.”

Brown states the number one challenge for those brands entering the global market is a lack of control. He says retailers seeking to go global should consider how they will retain the integrity of their brand or idea while seeking to develop it at the same time.

“Sometimes due to cultural differences or market differences, that you many not be completely aware of, either your brand or idea is going to have to adapt,” Brown says. “You’re not always going to be the one controlling it, and if you do completely control it to be what you’ve always wanted it to be, then you may not have the success that you could have had if you had allowed it to develop.”

“I think that it’s about being open about the fact that your exact way of thinking about things may not be perfect for what you’re trying to do.”

Six key mistakes businesses make

1. Lack of effective governance. Governance needs to be independent, too many businesses are governed by family or close friends.

2. Focusing on product instead of market. Businesses need to understand the market in order to create the right product.

3. Lack of a clear go-to-market strategy. Most New Zealand companies start here selling directly to the customers, and then struggle to make the transition to selling to distributors overseas.

4. Looking offshore to solve problems at home. Businesses which are struggling in New Zealand look overseas to alleviate problems, when in reality it is much more difficult.

5. Failure to hire and use the right people. Businesses need to hire the right people to support and international expansion without placing New Zealand operations at risk.

6. An international strategy that is too broad. Too many businesses have international strategies ‘like a lantern compared to a laser’, which dilutes the value proposition.

– Source: New Zealand Trade and Enterprise

Continue Reading

All aboard

There are several common themes running through the minds of the retailers we spoke to. Know your market, have a physical presence in the market you want to conquer, and plan, plan, and plan again. Do not assume anything. Communication is vital – talk to everyone involved, and talk to those who have ventured before you. And then, start your brand’s own journey to far away places and go forth and conquer.

This story originally appeared in NZRetail magazine issue 741 December 2015 / January 2016

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