NTUC FairPrice holds its ground through innovative concepts like FairPrice Express (courtesy of FairPrice)
Wonder why NTUC Fairprice and Cold Storage rules the grocery retail scene in Singapore?
Or why huge players like Wal-Mart and Target have largely stayed away from our shores?
In a world of global brands by FMCG players like Nike, Coca-Cola, Apple and P&G, it appears almost counterintuitive that huge retailers like Wal-Mart (the world’s largest company), Carrefour and Tesco are still largely local.
Here in Singapore, for example, NTUC Fairprice and Cold Storage have continued to remain as dominant supermarket players which managed to hold their ground despite the threat of the huge conglomerate Carrefour.
According to the article “Retail Doesn’t Cross Borders” in Harvard Business Review by Marcel Corstjens and Rajiv Lal, grocery retailers do not scale as well as other retailers (like fashion or luxury) internationally due to the following factors:
Most retail markets are dominated by local players in light blue (courtesy of HBR.org)
Against such a backdrop, how can retailers bring their businesses across borders in a successful manner?
Here, the authors suggested various rules (paraphrased by me):
First, get a strong grip on your home market. The stronger your positioning at home, the better your changes of sustaining overseas investments.
To grow your home market, here’s what retailers can consider:
Second, always bring something new to the market. By injecting an element of novelty, retailers can help to fill a gap in the foreign market.
Trying to beat an incumbent player by offering the same product at a lower price isn’t going to work.
Third, differentiation may be more important than synergies in a retail chain.
While back-office economies of scale like IT, finance, central purchasing and logistics can be enjoyed in foreign expansions, retailers need to ensure that they buy and stock up on what they can sell, rather than to sell what they have already bought.
Finally, the timing is critical in entering a market.
Too soon and you may face shoppers who aren’t ready for new concepts (eg hypermarkets) or the lack of reliable suppliers.
Too late, and you may miss the most attractive opportunities available.
A key here is to identify the right format of your retail outlet to suit local trends. Closely study lifestyle consumption patterns and trends, and keep your pulse on consumer preferences and purchase patterns long before you sink the piles into your first outlet.
For more information, check out the article on HBR.org here.
NEWS FLASH (28 Aug 2012): Barely two months after my post above, Carrefour has announced that it will be shutting both its stores at Suntec City and Plaza Singapura in Singapore before the end of the year. The major French-based hypermarket chain has been in Singapore since 1997. It is doing this as part of a move to leave Singaporean, Malaysian and Thai markets. Unfortunately, more than 380 employees will be affected.
More details in TODAY’s report here.
Carrefour closes in Singapore after 15 years (courtesy of IMS)