3 RETAILERS TELL PANEL GOING GLOBAL ISN’T EASY
Byline: Sharon Edelson
NEW YORK — As the U.S. becomes increasingly saturated with stores, retailers find themselves looking abroad for profits. But success doesn’t come easily, said three veterans of the international retail wars, who spoke on a panel here Wednesday at Goldman, Sachs & Co.’s Fourth Annual Global Retailing Conference.
Peter Starrett, president of Warner Bros. Studio Stores, Michael Kowalski, president of Tiffany & Co., and Carlo Tunioli, general manager of Benetton USA, have each achieved international penetration, but their methods have been different.
In the discussion, billed as “Building a Dynamic Global Retail Brand: Joint Venture, Franchise or Go It Alone?” Starrett noted that Warner Bros. Studio Stores has penetrated 12 international markets in only four years, mainly with the help of joint venture partners.
“If you have a concept and are considering going the owned-and-operated route, consider the pitfalls, such as the overhead,” Starrett said. “Local partners allowed us to expand in a very short period of time. The partner route offers speed. We would never be in 12 international markets on an owned-and-operated basis.”
Among other things, local partners can leverage their own infrastructure, creating a different economic model for a company like Warner Bros., Starrett said.
“They can help with product importation and management talent,” he added. “That allows Warner Bros. to plow its cash into creating great entertainment. Our acceleration in expansion came when we gave up the notion of having to own and operate every store.”
Warner Bros., which has overseas stores in London, Singapore, Hong Kong, Tokyo, Australia, Korea, Guam, Taiwan and Indonesia, is working with companies such as Dickson Concepts and DFS Group in various parts of the world.
But Starrett said creating joint venture partnerships comes with an inherent risk: entrusting your brand to someone else.
And he admitted that Warner Bros. made mistakes in the U.K.
“We took stores that are larger than U.S. stores at extraordinary rents,” he said. “We thought that everything that works for us domestically would work for us overseas. If we had it to do over we would definitely go with smaller format stores and have occupancy costs come into line.”
For Tiffany, the risk of losing brand control was just too great.
“The benefits of unequivocal control have led us almost singularly in the direction of wholly owned stores,” Kowalski said. “At the end of the day the blue box is just another box. We must constantly validate and revalidate the product in the box. We consider ourselves not a brand, but a branded retailer. We don’t focus on marketing a brand symbol. It’s not about image. It’s not about perception, and it’s certainly not about fashion.”
Kowalski said there is an emotional attachment between the consumer and the jewelry, such as “the wonderful definitiveness about buying a diamond engagement ring.”
By owning and operating its stores, Tiffany is able to control visual merchandising and pricing.
Kowalski said the company’s results since 1993, when it assumed direct management of its business in Japan, speak for themselves.
Since 1993, Tiffany has had double-digit increases, with a 14 percent jump in the first half of this year.
As for the iconoclastic point of view, count on Benetton, king of the controversial ad campaign. By its own admission, the company is a hybrid, said Tunioli, noting that it has a combination of owned-and-operated and franchised stores.
“Our global expansion is linked to flexibility, entrepreneurship and creativity,” he said. “A partner is always part of the equation in entering a new market.”
The company still makes waves with its advertising, a message that is seen across the world, in Europe, the Mideast and parts of Asia. “It is important to stand out, to attract attention,” Tunioli said. “There is an impact on the brand from controversy.”
Benetton had a tumultuous start in the U.S. — a foreign market for the $2.5 billion Italian apparel giant.
“We had a tremendous beginning, but at the end of the Eighties we started closing stores with the recession,” Tunioli said, noting that the chain closed 400 stores here. “In essence, the American distribution system works differently in Europe. We underestimated customer service and real estate.”
Now, Benetton owns a few stores such as its new Fifth Avenue flagship, where sportswear is sold along with sport brands such as Prince and Killer Loop.