Follow me to Oz

So, despite my repeated naysaying it seems not only is US ragtrader The Gap definitely coming to Australia (their first store will open in Melbourne next month), but they may well be leading a serious onslaught of entrants into the Aussie market.

According to this hype-heavy piece, the list of fashion retailers eying off Aussie wallets now includes Banana Republic (a Gap brand), Forever 21 (from US), Topshop (UK), and Uniqlo (Japan). While I am still taking this talk with a big grain of salt, there is certainly a long tradition of follow the leader amongst multinationals.

This behaviour may reflect several underlying motivations. Rivals may be concerned about early movers locking up resources and this limiting the scope for late moves.

In the retail domain there are grounds for concern that early movers may secure prime store locations, although this is much more of an issue in groceries and fast food than in fashion.  Indeed in fashion, it is more likely any early advantage comes from building stronger relations with landlords and property brokers as anchor tenants.

Unlike fastfood, the franchising model used is only likely to be rolled out at a country-level (i.e. companies are awarded the right to run all stores in a state or country, rather than companies that then sub-franchise to individuals store-by-store), so there is a less of a race to secure franchisees and/or build reputations.

Interestingly two of the most successful internationalisers H&M and Inditex (i.e. Zara) remain very tightlipped about any Aussie plans.  Both firms are much less inclined to franchise (mainly because they control their value chains much more tightly than the others on this list). They’ll need a lot more convincing that Australia represents sufficient bang for their buck/Euro/krona.  I suspect they still see Australia as small fry.

But I’m reluctant to say never anymore. The  performance of their international rivals down under may well play out as the demonstration effect (that this is a market worth seeking) that is a further key aspect of following.

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Are Aussie retail barriers melting?

Of note this week was an announcement that giant US ice-cream chain Ben & Jerry’s are set to launch in Australia.

As discussed here multiple times, Australia is a massive under-achiever in attracting international retail brands and players.

Our distance from the rest of the developed world (and also between our major cities) place us a long way down the list of new markets retailers target. Furthermore, copycat locals are pretty quick at jumping onto good ideas from elsewhere.

Food tends to be a better populated with multinational brands than fashion, variety and groceries. Franchising is much more practical here (and mimics within country practices at home), which lowers the risk and the need for hands-on knowledge.

Will Ben & Jerry’s prove successful? Australia is not an under-serviced market with large chains already in place including Wendy’s, Baskin Robbins, New Zealand Natural.

Indeed, Australia is reportedly already the 3rd largest per capita consumer of the sticky stuff.

Might Ben and his buddy be facing the sort of uphill battle that Starbucks faced down under?

A Boost Juice follow up

After posting last Friday about Boost Juice’s international expansion, I stumbled across this video of Janine Allis, the company’s founder, discussing their internationalisation process. It was recorded back in 2004, but is still highly relevant.

She offers insights into numerous international business issues, including:

– motivations for expansion (including overcoming domestic expansion, and seeking first mover advantages)

– mode choice (franchising versus foreign direct investment)

– country choice

– supply chain differences

– country differences

– adaptation of business models to international conditions

– learning from others about internationalisation.

The video comes from Business Essentials. They have done a follow up one recently, but I am still trying to find a copy.

Here’s another with Allis about the firm’s Australian expansion:

A juicy tale of international expansion

There is a nice little story in today’s Age about Australian juice bar chain, Boost, making a move into China.

Boost have been a big success down under with their flashy outlets and tasty drinks. While clearly (and openly) an adaptation of the California juice bars (such as Jamba), Boost has been very willing to take on internationalisation.

No doubt aware of the likelihood that they would eventually saturate the Australian market, and also of the scope to build a first-mover lead over other chains, the firm has sought growth across the globe, typically via master franchise arrangements.

It appears they now have stores in 12 countries (orange on map below) and have awarded master franchises in another six (they’re the green ones).

Sorry to harp on about it, but again we see little evidence of any strong home regional bias in expansion here. The firm will soon have stores on all of the inhabited continents. It certainly has not confined itself to the Asia-Pacific. Unlike most Aussie firms they haven’t even tackled NZ yet!

Expansion through franchising should, of course, be easier than through foreign direct investment, as the firm bears less direct risk. They can also tap into the adaptation expertise of other parties (local or international). In the UK, the Boost franchise is owned by Swiss multinational giant Nestlé. As noted in the story, Boost is working with an experienced US-based firm that has already taken the Subway and Gloria Jean’s brands into China.

So, where next for Boost?