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Where Will You Source Your New Customers?

As US retailers, we’ve all learned to source product in other countries.  But where will we source our next customer?

As the US economy falters, retailers are looking for new ways to grow their business.  By acquiring new brands or businesses, retailers can quickly increase their customer base and market share.  As an example,  fashion accessories company Fossil announced plans last January to acquire jewelry and watch manufacturer, Skagen Designs.  “Skagen is unique.  We see many similarities of our two companies and look forward to creating something great together,” said Fossil CEO Kosta Kartsotis. (1)

Other retailers have chosen to create new store banners or offer new brands, be it their own private label or additional national brands never carried before.  Macy’s has embraced the private label phenomenon, expanding the INC International Concepts brand and other in-house labels, so much so that in 2010, Macy’s private label business represented approximately 20% of sales. (2)

Most retailers have opened brick and mortar and web channel outlet stores to clear merchandise.  Many have tried upscale or downscale product offerings to capture new customers, including celebrity offerings and limited designer collections, like Target and Missoni  in September 2011or H&M and Marni early March of 2012.

Finally, some retailers aim to create a differentiated customer experience, either in their brick and mortar stores or direct to consumer by embracing “Retail-tainment”   or shopping as a form of amusement, entertainment or gaming.  Regardless of channel, retailers aim to enhance the customer experience with loyalty programs, Facebook fan pages, Twitter contests, Foursquare check-In’s, and in-store celebrity appearances.  Recently, there has been much brand activity on Pinterest, a virtual pin board where users can share their favorite things, people, thoughts, or ideas and monitor their board’s activity.  It has created an audience that is ready and willing to “like,” “pin” and “re-pin” to promote content and create a viral campaign.  Nordstroms, Urban Outfitters, Gap, Williams Sonoma and American Eagle have started to drive viral campaigns on Pinterest.  (3)

Today, it was announced that Wal-Mart partnered with Rovio Entertainment’s Angry Birds and will provide clues on Facebook and in stores to unlock secret gaming levels for Angry Birds new version, Angry Birds Space.  Additional clues will be embedded in select limited-edition Angry Birds merchandise available in Wal-Mart stores beginning March 25, including apparel, plush toys, mobile phones and snacks.

“Wal-Mart is bringing fun back to the shopping experience, with interactive merchandise that brings the best of digital gaming together with in-store retail,” says Seong Ohm, senior vice president and general merchandise manager for entertainment, Walmart U.S. (4)

However, if there is one growth strategy retailers have recently embraced, it’s going global.  As brands and stores lose market share in the US, resulting in store closings and smaller store footprints, and the direct to consumer channel grows exponentially, smart retailers are focusing on finding their next new customer by expanding into global markets in growing economies.

Many US retailers have tested their ability to operate globally by first creating a web presence in countries where they have no stores.  J Crew, for example, considers online direct sales a gauge to determine where there’s enough demand to warrant launching stores, and has begun scouting sites in Europe and Asia. It’s most keen on the U.K., Hong Kong and China. (5)

Many retailers are cautiously opening stores in English speaking countries where language may not be a barrier, starting in Canada.  The Children’s Place, Target, The Limited, Victoria’s Secret,  J Crew and Big Lots have all recently opened brick and mortar stores in Canada, cautiously dipping their toes into the international marketplace.

But to truly operate in the global marketplace, retailers are finding their next new customer in countries previously not explored:  China, Russia, India, and Brazil, the BRIC countries.  These countries are transitioning from a savings culture to a spending culture, and the untapped market of young, consumer driven millennials looking for the next new thing has caused US businesses to take notice.  While GAP’s business is imploding in the US, and they close 21% of their stores by 2013, by the end of this year they will triple the number of stores openings in China, up to 45 stores. (6) 

Brazil is Latin America’s biggest economy, the 7th largest economy in the world and is the fifth largest country in the world in terms of land mass and population, with about 193 million people. Brazil has weathered the economic downturn better than most major economies, bolstered by strong domestic demand and a growing middle class.  Brazil is now one of the top 10 markets sending travelers to the U.S. – 1.2 million Brazilian’s visited the US in 2011, spending nearly $6 billion.  This spend is forecasted to triple by 2016. (7)  

Stiff tariffs on all imports to Brazil push the prices of foreign-made goods into the stratosphere, turning Brazilians into world-class savvy shoppers.  Because of the staggering import taxes in Brazil, high-end handbags, shoes, garments and electronics can end up retailing for several times more than in Europe or the U.S. The iPhone 4S with 16 gigabytes of memory costs $1,515 without a contract on Apple’s Brazilian website. The same phone retails without a contract for $649 on Apple’s U.S. website.   In fact, Brazilians are spending so much in the US that flights with Brazil’s top airline TAM originating in the U.S. have had to carry more fuel to accommodate the dramatically overweight baggage. (8)

Brazilian’s retail spend is helping to boost local economies in hard-hit parts of the country, helping to change American immigration practices.  President Obama recently ordered the State Department to speed up the visa application process for tourists coming from Brazil, China and other nations with newly flush consumers.  (8)

It’s no surprise, based on the number of Brazilian visitors in the US, that Macy’s is kicking off a two month long promotion May 16th called “A Magical Journey to Brasil,” highlighting the designs and culture of Brazil.  The promotion will feature capsule collections by Brazilian designers and by other designers who are creating Brazil-inspired styles for the event, hoping to entice the Brazilian tourist into their stores.  (9)

By embracing global growth and expanding in fast growing economies, US retailers will find their next new customer.  Follow the growth populations, to follow the money.  And so on, and so on, and so on.

1.  1.  Jeweller Magazine, Jan. 12, 2011  

2.  2.  Macy’s 2011 Fact Book:

3.  3.  Nordstrom, Gap, Lowes Pin Traffic Growth on Pinterest, March 13, 2012, RIS News,-Gap,-Lowes-Pin-Traffic-Growth-on-Pinterest79153

4.  4.  Wal-Mart Flies Into Mobile Gaming, March 21, 2012, Internet Retailer

5.  5.  Women’s Wear Daily,  “J Crew Makes International Push,”  March 21, 2012

6.  6.  Gap Closing About A Fifth of Reail Stores, Expanding in China, USA Today, October 13, 2011

7.  7.  Dr. Anastasia Xenias, U.S. Department of Commerce, International Trade Administration, U.S. Commercial Service, “Retail Hotspots” presentation at the American Apparel and Footwear Association program, 1/31/2012

8.  8.  Brazil’s New Consumer Class Flocks to US to Buy, The Boston Herald   March 11, 2012.

9.  9. Macy’s Sets Brazil Promotion,  Women’s Wear Daily, January 30, 2012

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