A ROADMAP TO FOREIGN MARKETS
IF A MANUFACTURER ISN’T GOING OUT OF THE COUNTRY, IT MIGHT FIND ITSELF GOING OUT OF BUSINESS.
Byline: Arthur Friedman / Eric Wilson
NEW YORK — Going global isn’t as easy as it sounds.
Many fashion firms today want to establish themselves as international brands, but they also need to recognize the complexities and risks involved in becoming an exporter, industry consultants assert.
These international brand analysts help companies devise a strategy that determines the best way to market a particular product or label in a specific country or region. Not surprisingly, the consultants warn that without the right information and planning, a poorly conceived global formula can threaten brand equity already established at home.
However, as Shawne Mastronardi, director of consumer market services for Kurt Salmon Associates, said: “In the long term, to be a major player today, you have to be global. The importance of being an international brand is further underscored by the explosion of electronic commerce and new media technologies that offer access to new marketing and selling opportunities.”
Mastronardi said KSA’s annual soft goods financial analysis for the last three years has shown that apparel firms deriving at least 30 percent of their volume from exports are more profitable than those that are more domestically oriented. She said the export market is still maturing as the global economy evolves.
“As more developing countries improve their economies and cultural barriers are bridged through technology, new consumer markets are emerging with increased purchasing power,” Mastronardi said. “This is particularly true in Asia.”
For example, Mastronardi cited China’s 9.5 percent hike in gross domestic product, Singapore’s 6.7 percent GDP rise, India’s 7 percent increase and an average 8 percent gain in Southeast Asia as a region.
When advising clients about international markets, KSA focuses on maintaining the core image of the brand, while distribution and merchandising issues are handled on a country-by-country basis.
Companies that want to bring their brands abroad should first determine the target consumer, their economic and social profile and the overall apparel spending capacity of that market segment. With this information, the brand’s breadth and assortment can be crafted to that target consumer.
It’s also critical to analyze the competitive environment in terms of other U.S. brands and local brands in that market. That will help focus the brand’s niche, she said, and determine the best distribution.
“It’s also important to explore strategic markets even if the volume may not yet be at the proper level,” Mastronardi said. “That way, when the market’s economy matures, the brand recognition will have a foundation from which to grow.”
This includes countries and regions such as China, India, Eastern Europe and South America, she said.
The best approach firms can take in mapping a global strategy is to consider how their products will compete in a specific market, test them through local trade shows and monitor sales, said Gloria Gelfand, who joined Marketing Management Group as director of international marketing and merchandising in January.
Making a large investment in advertising at the outset would be risky, considering the product might not take off, she said.
Gelfand advises MMG clients to test their products at international trade fairs, particularly the Igedo and CPD shows in Germany, that attract scores of buyers from Europe and the Middle East.
“The first, most important presentation of an American vendor overseas is the Igedo,” Gelfand said. “The key market in taking a product international would be the Benelux region, where the market is in tune with importing American products already. They are reading our magazines and watching American television. It’s the greatest influence we’ve got.”
At MMG, Gelfand is establishing global initiatives to help American designers develop business abroad, much as she spearheaded brand development here as an executive for such European houses as Louis Feraud, Escada, Salvatore Ferragamo and Rena Lange.
MMG is working to arrange for about 20 vendors to show at the German fairs this fall and is offering a full package for developing global initiatives. Gelfand is also negotiating with Igedo for an American pavilion at the fair to showcase their products. MMG handles the logistics of overseas credit and currency, supervises retailer standards and hires local agents who know the right stores for the particular products, Gelfand said.
“Some products made here would have a distinct problem over there because there may not be a need for such a product, or they might compete with similar product already established,” she said.
Also, products tend to fall into a higher price point when they are translated outside the U.S.
The vendors that participate in MMG’s international strategy have been screened to determine that they would not compete against one another in Europe.
MMG is coaching the vendors on European delivery schedules, private label programs and the complexities of VAT, customs and handling. The company also wants to open an office in Europe as a hub for retailer interaction.
MMG will examine the American products’ pricing and how they fit into the global markets. Once their viability has been determined, the vendors might make some commitment in advertising, “but you can’t ask them to go over there and spend a fortune right away,” Gelfand said.
Developing a global approach also requires extensive and costly market research, said Kathy C. Yohalem, chief executive officer of C-Source Communications, a Coopers & Lybrand company.
Yohalem is the author of a book on forming growth strategies, including information on global approaches, titled “Thinking Out of the Box, How to Market Your Company Into the Future” (John Wiley & Sons Inc.), released in March.
“Many manufacturers and retailers are taking a wait-and-see attitude,” Yohalem said. “But they can start to do some market research and begin to understand what a foreign market needs, how it is different and what the laws and regulations are there.”
Vendors can use technology, such as the Internet, to research global markets to extend their presence electronically overseas, but in targeting specific markets, the most cost-effective approach is “hiring the proper consultant,” she said.
“You can’t afford to make a mistake,” she added.
Fashion Exports New York, an arm of the Garment Industry Development Corporation, has been helping New York-based fashion firms enter foreign markets for four years.
One of the key tools FENY has used to bring labels abroad has been organizing special booths at foreign trade shows in Germany, France and the U.K. and trade missions to Europe and South America. Leah Kaplan, director of FENY, said when FENY organizes a special exhibit, it also helps in setting up meetings with foreign buyers and agents and provides market analysis for a particular country or region.
She said FENY is currently recruiting companies for participation in two export promotions.
The first project is Lyon, Mode City, where FENY hopes to organize a group of American firms to participate in a special exhibit at the lingerie and beachwear trade show. The U.S. Department of Commerce is sponsoring a U.S. Pavilion at the exhibition, which last year attracted more than 13,000 buyers from Europe, Asia and the Middle East. The show takes place Sept. 6-8 for the spring/summer market.
The second project is Global Export Marketing Services, which is financed through a grant from New York State and is open to companies that have more than half of their manufacturing employees in the state.
Qualified firms receive targeted export assistance and financial support to pursue export expansion. FENY has received this grant the past two years, helping about a dozen firms increase their exports.
Kaplan said this year’s grant, still awaiting budgetary approval, will be earmarked for a FENY exhibition at the Pret-a-Porter trade show in Paris, Sept. 5-8, followed by a trade mission to London that same month.
FENY also maintains a database of some 120 affiliated manufacturers as a reference for foreign agents, distributors and buyers.