International retailing in the luxury fashion
industry
MASTER THESIS
Swie Hong Lo
5732816
Final draft: 15-10-2013
University of Amsterdam
MSc Business Studies: Double track - Strategy & Marketing
Supervisor: K. Quintelier
Preface
Working on a thesis takes up a lot of time and takes up a lot of effort. I could not have finished this thesis by myself and I would like to take this opportunity to thank a few people. First of all, many thanks to my thesis supervisor at the University of Amsterdam, Katinka Quintelier. She has been very helpful in the process and her guidance has led me to my final result. Concluding, I would like to thank everybody who has supported me with writing my thesis.
Table of content
1. Introduction 5
2. Literature review 9
2.1 International retailing 9
2.1.1 What is the internationalization of retailing? 9
2.1.2 Who are internationalizing? 10
2.1.3 Why are retailers internationalizing? 11
2.2 Barriers to international retailing 14
2.3 Luxury retailing 17
2.4 The case of Company A 22
3. Methodology 24
3.1 Expert analysis 25
3.2 Case study analysis 27
4 Results 29
4.1 Perceived barriers to internationalization 30
4.1.1 Local conditions 30
4.1.2 Brands 33
4.1.3 Staff 34
4.1.4 Management control 36
4.2 How to overcome the barriers to internationalization 38 4.2.1 Local conditions 39 4.2.2 Brands 41 4.2.3 Staff 42 5 Discussion 43 5.1 Theoretical implications 43 5.2 Managerial implications 51 5.3 Limitations 52 6 Conclusion 53
6.1 Recommendations for future research 57
Bibliography 58
Appendices 61
Appendix A 61
Abstract
An industry that has recently been growing is the luxury fashion industry. Nevertheless, while luxury fashion brands are expanding heavily into new markets and regions, luxury fashion multi-brand retailers are staying within their home boundaries. This event or phenomenon is very interesting and it raises questions about the origin of the phenomenon. The research questions are: why are luxury fashion multi-brand retailers not expanding internationally? What barriers exist in the perception of luxury fashion multi-brand retailers and how can a luxury fashion multi-brand retailer overcome these barriers? Furthermore, why are these barriers apparently not, to a certain extent, applicable to mono-brand retailers? And why is this only happening in the luxury fashion industry? This research used interviews with experts and a case study analysis to discover more about the barriers to internationalization of luxury fashion brand retailers. A case study was held at Company A, a Dutch luxury multi-brand retailer that has retail locations in Antwerp, Belgium as well and is looking for new business opportunities in Germany and the UK. The experts stated that local conditions, brands, staff and management control were perceived as barriers to internationalization and Company A was able to partially overcome these. Furthermore, a distinction was made between the applicability of the barriers to luxury and non-luxury retailing, and between multi-brand and mono-brand retailers. The research provided contributions to strategy and marketing literature and offered interesting discussion points with the new role of the Internet and the re-shaping of the retail environment. What is the future of the luxury multi-brand retailer?
1 Introduction
In the current dynamic marketplace, markets and organizations are constantly changing. The economic crisis is making the environment more difficult and unstable, however there is a market that has actually experienced growth in the last years: the luxury goods industry. After suffering losses in 2008 and 2009, it has been experiencing growth with 13%, 11% and 10% in the last three consecutive years (Bain, 2012). Being in double digits for the last three years is remarkable with the knowledge that other industries are still in decline. The growth of this industry in Europe is also because of the growth of consumption of tourists, mainly from Asia. These foreign consumers are becoming a larger share of the customer base each year and are predicted to grow in the coming years (Bain, 2012). Now is the time for growth and now is the time for expansion; organizations need to react quickly to experience and exploit the growth of the market.
As the market is growing, it would be expected that luxury fashion retailers would take advantage of the growth and expand their retail locations. However, this does not always seem to be the case. It seems that on the one hand luxury fashion mono-brand retailers (from now on mono-brand retailers), retailers who are mainly selling one brand and are also
vertically integrated with their main brand, are opening new retail locations around the globe (Corbellini & Saviolo, 2010). On the other hand, luxury fashion multi-brand retailers (from now on multi-brand retailers), retailers who are selling multiple brands and are not vertically integrated with any of the brands, are rarely expanding abroad and are staying within their domestic market. If one of the motives for retail internationalization is growth, than why are multi-brand retailers not grasping the opportunity?
The academic literature is quite substantial regarding international retailing. From the beginning of Hollander (1970) to key authors such as Alexander (1997), Treadgold (1990)
and Fernie et al. (1997), a lot has been written about international retailing. Topics within international fashion retailing such as motives for internationalization, methods for
internationalization, who are internationalizing and where they are internationalizing to, are covered within the academic literature. However the barriers of internationalization have not been discussed thoroughly, only a limited amount of research has been done. Business
distance (Dupuis & Prime, 1996) and psychic distance (Evans & Treadgold, 2000) are the few barriers of internationalization that can be found in the literature. Although other factors such as financial resources and motivation might hinder multi-brand retailers to
internationalization, the topic of this research is the barriers to internationalization. This is a field of research that has not been discussed thoroughly and more research seems necessary.
Furthermore, the luxury fashion industry is a very special industry with a few very rare characteristics. Firstly, a luxury good is considered a Veblen good (Veblen, 1899); a Veblen good is a good where the demand rises as the price of the product rises. This is in contrast to a normal good, where demand decreases when the price of the product rises. Secondly, when income rises the demand of luxury goods rises as well, however the demand increases relatively higher than the income. This is in contradiction to a necessity good, such as food, where the increase of demand is equal to increase of income. However, this is also the case the other way around, when income decreases, the demand for luxury goods decreases even more, thus high-income elasticity of demands. Thirdly, luxury goods are different from other goods, because it relates a lot with exclusivity and rareness. The more exclusive the luxury good is, the higher the demand of the luxury good. This can be done for instance by limited amounts or by very high pricing. Thus, luxury goods are very different from other goods and different theories apply. Therefore, when looking at internationalization of luxury fashion retailers other factors apply than for other retailers. Furthermore, in the luxury fashion industry there seems to be a phenomenon occurring where mono-brand retailers are
expanding internationally, while multi-brand retailers are staying within their home markets. In other retailing industries, such as for instance fast moving consumer goods, this does not seem to be the case. Hypermarkets such as Carrefour have been expanding internationally (Dupuis & Prime, 1996; Tordjman, 1988), as well as fashion mass-market retailers such as Urban Outfitters (Jones Lang LaSalle, 2013). Therefore, there seems to be an interesting phenomenon happening in the luxury fashion retailing industry that is keeping multi-brand retailers within their home market.
The goal of this research is to find out what the reasoning is of luxury fashion multi-brand retailers not to expand internationally and to add to the discussion of international retailing. The research questions are: why are luxury fashion multi-brand retailers not
expanding internationally? What barriers exist in the perception of luxury fashion multi-brand retailers and how can a luxury fashion multi-brand retailer overcome these barriers?
Furthermore, why are these barriers apparently not, to a certain extent, applicable to mono-brand retailers? And why is this only happening in the luxury fashion industry? This research will lead to a better understanding of international retailing and will contribute to the ongoing discussion.
This research has used qualitative methods as research methods. Firstly, the literature was reviewed to find out possible answers to the research questions and to discover more information regarding luxury fashion retailing. Secondly, experts were interviewed using semi-structured interviews to find out their take on the situation. These experts were luxury fashion multi-brand retailers in Germany and the UK and were hesitant about international expansion. This led to the barriers that are perceived to exist by multi-brand retailers. Thirdly, a case study was performed at Company A. Company A is a luxury fashion multi-brand retailer in the Netherlands that has successfully expanded internationally to Antwerp, Belgium and is now looking for new expansion possibilities in Germany and the UK. This led to
answers what barriers Company A actually experienced and how they overcame these barriers. This than led to a comparison between what experts perceive as barriers and to eventually compare this with the real-life situation of Company A Antwerp. This comparison is the first step in understanding what the barriers are to internationalization of luxury fashion multi-brand retailers and how to overcome these barriers.
Within this research there is a relevance to be found in strategic perspectives as well as marketing perspectives. For strategic perspectives, this research is dealing with international expansion and provides more insights to international expansion. What are the barriers to luxury fashion multi-brand retailing expansion? More specifically, it adds to the discussion started by Dupuis & Prime (1996) and Evans & Treadgold (2000) of what the barriers to international retailing are. For marketing perspectives, this research is dealing with a very specific niche market of retail marketing, namely luxury retail marketing. Does the luxury aspect have an effect on international retailing decision-making? It helps to explain the factors of luxury that have an influence on expansion. It adds to the discussion started by Akehurst & Alexander (1996) on the internationalization of retailing and also to the discussion started by Nueno & Quelch (1998) on the mass marketing of luxury.
This thesis has the following outline; firstly from the literature a more detailed explanation about international retailing will be provided. Secondly, a more thorough and detailed view will continue with luxury retailing. The luxury fashion industry is an industry that has certain characteristics that requires additional explanation. From this perspective the state of the literature will be reviewed. The methodology and the results are next and the thesis will end with a discussion and a conclusion. In the discussion the results will be
discussed and conclusions will be drawn. Limitations of the research will be elaborated in the discussion as well. In the final part, the conclusion, an overview of the research will be provided and suggestions for future research will end the thesis.
2 Literature review
The literature review is built up as follows; first a paragraph about international retailing will be discussed. After that barriers to international retailing are described followed by luxury retailing. Concluding the literature review will be a case study of Company A, a Dutch luxury fashion multi-brand retailer.
2.1 International retailing
This paragraph will deal with the state of the literature on international retailing. What has been described in the literature and what does require extended research? Firstly, the concept of international retailing will be explained together with other questions such as who are retailing internationally and why are they retailing internationally.
2.1.1 What is the internationalization of retailing?
Internationalization is a very broad concept; it can deal with everything that has to do with doing business abroad. Therefore, it is important to set the correct categories and definitions of what internationalization of retailing is.
Internationalization of retailing exists out of three basic categories, namely sourcing abroad, internationalization of know-how and operating retail stores abroad. This research solely focuses on the final category, namely opening retail stores abroad. Sourcing abroad and internationalization of know-how are entirely different ways of internationalizing and are not the topic of this research (Hines & Bruce, 2007, Wigley et al; 2005).
Opening new retail stores in a foreign country is not as straightforward as it may seem. This category also brings up a lot of questions that are also of influence to this research, like who are internationalizing, why are they internationalizing, where are they internationalizing
and how are they internationalizing (Hines & Bruce, 2007). Some of these questions will be taken into account further in the literature review and in the course of this research. Thus, in this research, internationalization of a retailer means opening new retail stores in a foreign country. The other categories of internationalization of retailing are not taken into account.
2.1.2 Who are internationalizing?
Who are internationalizing is a topic that is very difficult to determine. However there is literature from Fernie et al. (1997) that has categorized the different types of organization that are international fashion retailers. Fernie et al. (1997) categorized international fashion
retailers into four categories: product specialist retailers, fashion designer retailers, general merchandise retailers and general fashion retailers. This research is only dealing with two of these categories, namely the product specialist retailer and the fashion designer retailer. Two categories are being discussed, since there is a difference in categories between a mono-brand retailer and a multi-brand retailer.
The first category is the product specialist retailer, this is a retailer that has focused upon a narrow and specific product range and has a clearly defined target segment. This can for instance be an organization that solely sells socks or ties to a certain target segment or a certain lifestyle. For instance Nike is also a product specialist retailer with their Nike Town stores. They have a specific product range, namely sportswear, and target a sport-influenced lifestyle. Luxury fashion multi-brand retailers can also fit in this category. They have a specific product range with luxury fashion wear (in this research solely menswear) and target a luxury-influenced lifestyle. The lifestyle can also be described as exclusive or cosmopolitan. While product specialist retailers are mostly active in the mass-market high streets, luxury fashion multi-brand retailers are mostly active in the luxury high streets (Fernie et al; 1997).
The second category is the fashion designer retailer, Fernie et al (1997) defines this group as follows: “the international fashion designer retailers have an international profile in the fashion industry as evidenced in their having a bi-annual fashion show in one of the international fashion capitals and have been established in the fashion design business for at least two years.” This group serves the market through brand named outlets, so these are stores that carry the brand name, such as for instance the Chanel store or the Louis Vuitton store. The location is mainly in the premium luxury streets of the world such as New Bond Street in London or the P.C. Hooftstraat in Amsterdam. These are the luxury fashion mono-brand retailers that are also part of this research.
There is thus already a difference in categorization of luxury fashion mono-brand retailers and luxury fashion multi-brand retailers. This is one of the basic differences between the two types of retailers and it is the first step in understanding why mono-brand retailers are expanding internationally and multi-brand retailers are quite hesitant to do so. Already we can see a difference in that fashion designer retailers, luxury fashion mono-brand retailers, already have an international profile in the fashion industry and have fashion shows in the
international fashion capitals. This seems not to be applicable directly to the product specialist retailer, the luxury fashion multi-brand retailer.
2.1.3 Why are retailers internationalizing?
In order to discover why multi-brand retailers are not expanding internationally, it is worth to discover why retailers are internationalizing. What are the motives for a retailer to cross its domestic borders?
One of the first motives that were described by Hollander (1970), Salmon & Tordjman (1989) and Treadgold (1991) was to grasp market opportunity. This is also the most obvious motive to internationalize for a fashion retailer; growth is mostly named as the most important
motive. Sometimes market saturation of the home country is a motive to go abroad due to new business opportunities abroad that are not available in the home country.
Tordjman & Dionisio (1991) categorized the motives for international fashion retailers into two categories: constraints and opportunities. Constraints are related to the home market, this can be a constraint such as limited domestic growth. Opportunities are related to the host market, such as high market growth and new market opportunities. Tordjman (1995) later included a more thorough explanation by providing external motives as well, these were for instance homogenous consumer tastes and international exchange of information.
Williams (1992) did empirical research toward the motives for internationalization of fashion retailers. His work led to four categories of motives that were ranked as well, these were proactive and growth oriented, limited domestic market growth opportunities,
internationally appealing/innovative retail offering and passive motives. This is very related to the research of Tordjman & Dionisio (1991). According to Williams’ (1992) research, growth is the most important motive for international expansion.
Alexander (1997) developed another important view of why fashion retailers internationalize; his work provided a good overview of motives for internationalization. Alexander (1997) explained the push-and-pull theory (Kacker, 1985) and relates this to
international fashion retail. Push-and-pull theory is as follows, push factors are the factors that “push” you away from your home market. These are factors that make your home market less attractive. Pull factors are the factors that “pull” you toward the foreign market; these are factors that make the foreign market more appealing. Of course these two factors are not mutually exclusive and a combination of both is also very common. Within the push-and-pull factors there are five categories, these are political, economic, social, cultural and retail structure. These five categories are not mutually exclusive as well and a combination of multiple categories is also very common. Political push factor is for instance government
instability, while a political pull factor is government stability. Economic push factor is for instance low GDP growth, while a pull factor is a high GDP growth. More examples can be found in Table 1. Although this theory is a good list of factors and a good explanation of motives, according to Hines & Bruce (2007), this is not an exhaustive list and more empirical research is necessary to really explain the motives of international fashion retailers and to explain why luxury multi-brand retailers are a category retailer that are rarely expanding abroad.
The motives for internationalizing are thus diverse, however growth seems to be a recurring topic. The luxury industry is indeed growing, as mentioned earlier it has been growing with 13%, 11% and 10% in the last consecutive three years. The push factors for growth are positive. It appears that mono-brand retailers are indeed growing and taking advantage of the growing market, brands such as Louis Vuitton, Prada and Chanel are
opening new retail stores worldwide and are expanding their market. However, it appears that multi-brand retailers are very hesitant about this (Bain, 2012). Why are multi-brand luxury fashion retailers not expanding internationally? There seem to be barriers that are preventing them from internationalizing. Therefore the next step in the literature review is to have a detailed look at possible barriers to internationalization of retailers and to have a closer look at luxury retailing.
Boundary Push Pull
Political Unstable structure,
restrictive, regulatory environment, anti-business culture dominant, consumer credit restrictions
Stable structure, relaxed regulatory environment, pro-business culture dominant, relaxed consumer credit regulations
Economic Poor economic conditions,
low growth potential, high operating costs, mature markets, small domestic market
Good economic conditions, high growth potential, low operating costs, developing markets, property investment potential, large market, favorable exchange rates, depressed share prices
Social Negative social environment,
negative demographic trends, population stagnation
Positive social environment, positive demographic trends, population growth
Cultural Unfamiliar culture climate,
heterogeneous cultural environment
Familiar culture reference points, attractive cultural fabric, innovative
business/retail culture, company ethos, homogeneous cultural environment
Retail structure Hostile environment, high concentration levels, format saturation, unfavorable operating environment
Niche opportunities, company owned facilities, ‘me too’ expansions, favorable operating environment
Table 1. Push and pull factors behind retail internationalization (Alexander, 1997)
2.2 Barriers to international retailing
The previous paragraph provided a short explanation about international retailing and introduced the phenomenon that mono-brand retailers are expanding internationally while multi-brand retailers are very hesitant toward this. Apparently there are factors that are restricting the multi-brand retailers to internationalize. These possible barriers can be perceived as factors that are limiting the ultimate success of internationalization. From the literature a few researchers have discussed this phenomenon, however there are key factors
Firstly, Dupuis & Prime (1996) were one of the first who researched the key
success/failure factors of international retailers. Their research was conducted with the use of two case studies of the French hypermarket concept in the USA and Korea. The research was based upon the prism effect on business distance. Business distance was perceived as how the host market is culturally distant from the home market. Business distance was measured on four levels: the customer (location, equipment, shopping habits), the retail store (concept and retailing mix), the channel mix (relationship management with internal and external channels) and the environment (public opinion, legal, government, competitors etc.). The prism effect was the effect internationalization had on the competitive advantage of the firm, this could have three different forms: transparency (no effect), amplification (competitive advantage increased in the host market) and reduction (competitive advantage is decreased in the host market). In other words, their research was about how the business distance affects the competitive advantage of the firm in the host market. Dupuis & Prime (1996) state that
business distance is one of the possible barriers to internationalization, if the business distance to another country is perceived as too large, than this is a barrier to internationalization. They see it as a reduction effect of their competitive advantage. Their research is a good basis for understanding what the barriers are, however they state themselves that there is a need for empirical research toward this topic and that their research is solely the first step toward a better understanding. Their research was only based on the hypermarket concept that mainly sells fast moving consumer goods, this research is however about the luxury fashion industry, which is a very different industry. Furthermore, there is no difference in business distance for a mono-brand retailer and for a multi-brand retailer, but mono-brand retailers are expanding internationally and multi-brand retailers are very hesitant. It seems that this does not explain the phenomenon, but it seems that mono-brand retailers and multi-brand retailers might perceive business distance differently.
Evans & Treadgold (2000) provide a theoretical framework where they relate psychic distance to the performance of international retailers; they suggest that psychic distance is one of the key barriers to internationalization. Psychic distance has had several changes in
definition since its initial start and there is still no consensus about it (Beckerman, 1956; Vahlne & Wiederheims-Paul, 1977; Nordstrom & Vahlne 1994; O’Grady & Lane 1996). Evans & Treadgold (2000) defined psychic distance as: “the distance between the home market and a foreign market resulting from the perception and understanding of cultural and business differences. Such business differences may include the legal and political
environment, economic environment, business practices, language and industry or market sector structure”. The perceived distance between the home market and foreign market is one of the key determinants of success of international retailing. The larger the psychic distance between the home market and the foreign market and how little the understanding of the psychic distance, the lower the performance of the international retailer will be. Evans & Treadgold’s (2000) research was however only based on a literature review; they state in their discussion that empirical research is still a necessity to come to more understanding of the key success factors of an international retailer and also the barriers to internationalization. Their research was only based upon retail generally and a more narrowed down approach toward luxury fashion retailing is missing. Again, this does not explain the phenomenon, because psychic distance is similar for mono-brand retailers and multi-brand retailers. This also leads to the suggestion that mono-brand retailers and multi-brand retailers have different
perceptions of distance. There appears to be a difference in the perception of distance within the management teams of a luxury fashion brand and a multi-brand retailer.
Business distance and psychic distance seem to be possible barriers to internationalization of a luxury fashion multi-brand retailer. It appears that too large
business and psychic distance between a home and host country is the same for a multi-brand retailer as for a mono-brand retailer. Mono-brand retailers are expanding internationally, while multi-brand retailers are very hesitant toward this step. One option is that the distance is perceived differently by different organizations. Expected is that other factors are also playing a role, such as factors of luxury. Thus, this is not fully explaining the situation and more research is needed. In the next paragraph luxury retailing will be discussed, expected is that some factors of luxury have an influence on this phenomenon.
2.3 Luxury retailing
To understand luxury retailing, it is important to understand what luxury is. Firstly, it is important to set a definition of what luxury is. Several researchers have set several definitions of luxury, such as Veblen (1899) that based its definition on “conspicuous waste” or Kapferer (1997) who states that luxury surpasses utility and is more than a mere object and provides pleasure and a sign of good taste. This research follows the definition of Nueno & Quelch (1998). Nueno & Quelch (1998) have a different perspective; they criticize Kapferer’s
definition and put costs into the equation. They define luxury brands as: “those whose ratio of functionality to price is low, while the ratio of intangible and situational utility to price is high”. This definition speaks more about the ratio and how luxury is actually too highly priced if compared to the utility value of the product. According to several authors (Vickers & Renand, 2003; Vigneron & Johnson, 2004), this definition is more precise, because it deals with costs and ratio. However, luxury should always been seen in a socio-economic context, context matters as this determines what utility is.
According to Dubois et al. (2001), there are six elements that together form luxury. These elements are: excellent quality, high price, scarcity and uniqueness, aesthetics and polysensuality, ancestral heritage and personal history, and superfluosness. These elements
together form a luxury brand and put the luxury factor into the brand. It can already be seen that multi-brand retailers are not in full control of all these elements, for instance they cannot determine the scarcity and uniqueness of the brands, since they are not in control of the distribution of the brands. This means that the brands can control if other retailers will also sell the brand or if you are not allowed to sell the brand. Some multi-brand retailers’ success is very dependable on a few brands; there are always a few key brands that sell extremely well. Thus, when a multi-brand retailer considers expanding internationally and it is not granted access to the preferred brands, it might see this as a deal breaker. This might serve as an explanation to the phenomenon of mono-brand retailers internationalizing vs. multi-brand retailers not internationalizing. The luxury fashion brands might influence the decision-making process of a multi-brand retailer that wants to expand internationally.
Luxury fashion retailing goes through multiple retail channels. These retail channels can traditionally be sorted into two categories: retail distribution and wholesale distribution. The distinction lies, in that retail distribution goes through retail channels that are owned by the luxury fashion brand such as mono-brand retailers or shop-in-shop concepts, where a mini-store is created within a larger retail channel such as a department store. While at wholesale distribution, the retail channels are not owned by the luxury fashion brand, these are multi-brand retailers and department stores where there is not a shop-in-shop. Nowadays, a third category can be added, namely the Internet or retailing through e-commerce. From these categories, the first category is where most of the sales of the luxury fashion brands take place. Luxury fashion brands have a preference for their own retail distribution, because they can control the brand experience better and have higher margins on their sales. The brand experience is very important for any brand, but for luxury fashion brands in particular. Luxury fashion brands are based upon experience of the brand and the product; the experience of the entire purchasing process is adding more value to the product than for a regular good. Thus, it
is important to control the purchasing process and this is one of the reasons why luxury fashion brands prefer to work through retail distribution and not wholesale distribution. Furthermore, there are higher margins on the sales if it is sold through wholly owned retail channels. Vertical integration is mostly leading to higher margins and this is also one of the reasons why luxury fashion brands prefer to work through retail distribution and not
wholesale distribution (Jackson, 2004).
Not only are the luxury fashion brands expanding, they are increasingly involved with conglomerates. The major conglomerates of this moment, Louis Vuitton Moët Hennessy (LVMH), Richemont and Gucci, are together accountable for over 60% of luxury fashion sales in the world (HSBC, 2012). The conglomerates are growing increasingly and this offers certain advantages for the luxury fashion brands involved. Being linked to a large
conglomerate means for instance that you have access to more financial resources. Another advantage is the parenting advantage; the parenting advantage is the synergy that exists
between different business units and the corporate group within a conglomerate. Experience is for instance a factor that can be shared within the conglomerate that leads to a competitive advantage. Moore & Birtwistle (2005) found in their research that for luxury brands,
especially the branding experience and brand management are synergies established from the parenting advantage. The different business units and the corporate group are sharing their knowledge and experience regarding branding experience and brand management. The parenting advantage, can explain why mono-brand retailers are expanding internationally and why multi-brand retailers are hesitant toward this. This is also related to the brand experience that has so much impact on the success of a luxury fashion brand.
It seems that for luxury fashion brands, expansion through mono-brand retailers has certain advantages compared to expansion through multi-brand retailers. Firstly, the exclusive distribution is determined by the luxury fashion brands. Exclusive distribution can have two
reasons, firstly there is the uniqueness and scarcity factor; secondly there is the brand experience factor. A luxury fashion brand wants to retain its uniqueness and scarcity by limiting the distribution. If a multi-brand retailer’s store concept is very dependent on certain brands, than it is creating a dependency on these brands. If this multi-brand retailer than decides to expand internationally, its success is dependable on attaining its preferred brands. However, if a luxury fashion brand decides to limit the distribution than this can than lead to a barrier to internationalization of the multi-brand retailer (Dubois et al; 2001). Secondly, Jackson (2004) showed how important the brand experience is for luxury fashion brands and how this is increasingly pushing luxury fashion brands toward vertical integration. This is also related to the growth of the fashion conglomerates and the parenting advantage that is pushing vertical integration as well. The brand experience and brand management seem very
important for luxury fashion brands and this is increasingly leading to more mono-brand retailers. Thus, a luxury fashion brand might want to keep its distribution to retail distribution as much as possible, since than they have control over the brand experience and brand
management.
When taking brand exclusivity and exclusive distribution in mind, what is the role of the luxury fashion brand in the phenomenon that multi-brand retailers are hesitant to
internationalization? And also, to what point is expansion of a luxury fashion brand allowed and not diluting the raison d’etre of exclusivity of a luxury fashion brand? These are however all related to the perspective from a luxury fashion brand and not in the perspective from a multi-brand retailer. Furthermore, this does not fully explain why mono-brand retailers are expanding abroad and why multi-brand retailers are not. If it was the case that mono-brand retailers have major advantages for luxury fashion brands, than there would be no reason for multi-brand retailers to still be active. This is however not the case, multi-brand retailers are still active, but they do not expand internationally. It seems that different locations have
multi-brand retailers present, but these are only active within the home market. Thus, while factors of luxury are a good start to understanding the motives of multi-brand retailers to stay within the home market it does not fully explain it. Furthermore, luxury can definitely play a factor in internationalization, but there is no research to describe exactly what this entails. It is important to obtain a perspective from multi-brand retailers, since it appears that only
research has been done from a luxury fashion brand’s perspective and thus mono-brand retailers’ perspective. This can than provide new insights for retail marketing and luxury retailing.
Hutchinson et al. (2006) did research toward the influence of management characteristics in internationalization of a small medium enterprise. They used a British retailer as a case study for their research. According to them, the management is one of the key influencers of internationalization. They divided the management characteristics in two categories: objective and subjective. Objective management characteristics were related to knowledge and experience, these were for instance: ability to network, overseas experience and business skills. Subjective management characteristics were related to attitudes,
perceptions and personality, these were for instance: personality and vision of the
entrepreneur and attitude toward risk. These management characteristics were determinants of international success of a small medium enterprise; they put an emphasis on the managerial team and on human capabilities as barriers as well as key success factors. This might seem applicable to the luxury fashion industry as this could be linked to the parenting advantage of luxury fashion brands. This could explain why mono-brand retailers are expanding due to the parenting advantage and possibly why multi-brand retailers are hesitant toward expanding internationally. This could also explain where different perceptions are coming from and why some retailers are interpreting barriers differently. However, this research was not applied in
the luxury fashion industry and further research could lead to better results. This is however a start to understanding where difference in perceptions are coming from.
Barriers to internationalization for multi-brand retailers are a field that has not fully been researched yet. It seems that barriers to internationalization are perceived differently by a mono-brand retailer and a multi-brand retailer, but also among different multi-brand
retailers. This leads to the research questions: why are luxury fashion multi-brand retailers not expanding internationally? What barriers exist in the perception of luxury fashion multi-brand retailers and how can a luxury fashion multi-brand retailer overcome these barriers? Luxury fashion brands might build restricting factors to multi-brand retailers as in the case with exclusive distribution. Furthermore, the success of a luxury fashion brand is also dependent on the distribution and therefore they might choose to limit the distribution to their own retail channels. Thus, what is the influence of the concept of luxury in this phenomenon?
There is an interesting case of a Dutch luxury fashion multi-brand retailer that has successfully internationalized and is planning to expand even further. This case is a unique case and is acting differently than other multi-brand retailers. Access was granted to this organization and information from this organization might explain what the barriers are and how a multi-brand retailer can overcome these barriers. The case study deals with the second part of the research questions: how can a luxury fashion multi-brand retailer overcome these barriers? It provides insights into the success factors of a multi-brand retailer when expanding internationally.
2.4 The case of Company A
The case that was used for this research was the Dutch luxury fashion multi-brand retailer Company A. Interviewee A founded Company A in 1989. Before he started Company A, he was the commercial director at Society Shop for a few years before moving on to being
commercial director at Laura Ashley. Both of these companies gained him experience in the field of luxury retailing and international retailing. After travelling around the world working for Laura Ashley and the Society Shop, he saw that there were luxury fashion multi-brand retailers that offered an extreme high level of service. Furthermore, he saw the rise of Italian menswear that was far more sophisticated and luxurious compared to the German menswear that at the time ruled the Dutch menswear market.
In 1989 Interviewee A opened his first store in the now prestigious P.C.Hooftstraat. His store offered Italian menswear and consisted of luxury brands. Company A has always been a retailer that offered the highest luxury brands for menswear and leather goods. Nowadays it offers brands such as Cesare Attolini, Brioni, Brunello Cucinelli and Santoni, just to name a few. Furthermore, they have started creating private labels; firstly Private Label A, secondly a lower-priced range called PRIVATE LABEL B and lastly Company A
Handmade, the finest luxury fashion private label. All the stores are set-up with three sections that are in separate rooms but can still be accessed with a general hallway. The first section is the formal wear section, in this section, mostly formal wear such as suits or blazers are being sold. In this section brands such as Isaia, Emanuele Maffeis and Company F are being sold with mostly suits, shirts and blazers. The private labels Private Label A and PRIVATE
LABEL B are also available in this section. The second section is the casual wear section; this section is offering more casual clothing such as knitwear and jeans. Brands such as Jacob Cohen and Woolrich are being sold in this section. The final section is the Atelier Italia; this section offers the highest of luxury fashion in a formal and casual sense. This is where Company A is selling Brunello Cucinelli, Brioni and their private label Private Label C.
The family has always owned and managed the firm by themselves. First and foremost by Interviewee A himself and after a few years his sons, Interviewee B, Chief Communication
Officer and Interviewee C, Creative Director and Head Buyer, started working for the firm as well.
Nowadays, Company A consists of four multi-brand stores in Amsterdam, The Hague, Rotterdam and Antwerp, Belgium. Furthermore, Company A Holding is also the owner of Company A Donna, a womenswear store in the P.C.Hooftstraat in Amsterdam, Company A Outlet in Haarlem and the franchisee of Company F in Amsterdam. Company A Holding was previously also a franchisee of Zegna and Ralph Lauren, both in the prestigious
P.C.Hooftstraat as well.
In 2009 Company A opened its first store abroad in Antwerp, Belgium. This store is located at the Lange Gasthuisstraat, just around the corner of the prestigious Keyserlei. This store is the first international expansion of Company A, something that is very rare for luxury multi-brand retailers. Nowadays, Company A is looking for even more expansion possibilities within Europe and in particular in Germany and the UK. As an intern at Company A the possibility was present to access and gain information regarding the company and to gather data that was previously not available. Therefore, Company A was chosen as a case study, it was a rare and critical case and there was the possibility to gain access to rare information.
3 Methodology
In this chapter, the methodology used in this research will be discussed. This research is of exploratory nature. An exploratory study is used to find out what is happening and to seek new insights into a certain phenomenon. It is used if the precise nature of the problem is unknown and to clarify the understanding of the problem. In this research the phenomenon is that multi-brand retailers are not expanding internationally, while mono-brand retailers are
expanding very fast in a global market. Qualitative methods are most suitable for exploratory studies and the methods of this research will be explained below (Saunders et al; 2007).
Two analyses were performed in this research; firstly the expert analysis will be discussed followed by the case study analysis. The research questions are: why are luxury fashion multi-brand retailers not expanding internationally? What barriers exist in the perception of luxury fashion multi-brand retailers and how can a luxury fashion multi-brand retailer overcome these barriers. The expert analysis serves to discover why multi-brand retailers are not expanding internationally and serves to answer the first part of the research questions. In other words, it serves to discover the perceived barriers by multi-brand retailers to internationalization. The case study analysis serves to discuss the reasons why multi-brand retailers are not expanding internationally and to find out how a multi-brand retailer can overcome the barriers to internationalization.
3.1 Expert analysis
The first part of the research was discovering what barriers luxury multi-brand retailers expect to face when expanding internationally. It is dealing with the first part of the research
questions to find out why multi-brand retailers are not expanding internationally. In order to research this, information was necessary from multi-brand retailers that are active within the luxury fashion industry and have motives to expand internationally. Only the management teams of these multi-brand retailers will know the motives to expand internationally and what is restricting them in this step, they can elaborate on what they see as barriers to
internationalization. In order to find out what the motives are for not internationalizing, it is necessary to obtain information from multi-brand retailers that have motives to expand international, but choose not to. Therefore, a group of experts were reached out to for participation in this research. Qualitative methods were chosen for this research, since not a
lot was known about the topic and hypotheses could not be formed (Saunders et al; 2007). A group of experts were selected to reach out to for interviews. The participants of the interviews were derived from a study by Jones Lang La Salle (2011); they researched the European luxury high streets. Their research led to a group of five cities within Germany and the UK, within these cities, key multi-brand retailers were identified and these were
approached for assistance. The key multi-brand retailers were identified based upon brands they carried and the retailing model. Department stores were excluded, due to their size and different characteristics. A group of ten similar organizations were reached out to for an interview. Of these ten organizations, four organizations were willing to cooperate. Within these four organizations, one organization agreed to interviewing multiple persons, the other three remained to solely one interview. The interviews were held with the current CEO’s, in one particular case the partner as well and in one case a store manager. These experts are active within luxury fashion multi-brand retailers that have motives to expand internationally, but choose not to. These experts have the knowledge to discuss the motives to expand
internationally and to elaborate further on the perceived barriers to internationalization. Thus, they are the best option of experts to interview regarding the research questions.
The interviews were of semi-structured nature; the questions had a clear direction, motives not internationalizing, but there was room for discussion. Semi-structured interviews were chosen, because from the literature, it became clear that there was still a lot unknown and it fits with the exploratory nature of the research. There was not enough data to set-up clear hypotheses and to allow testing of hypotheses, therefore qualitative methods with the use of interviews was the appropriate way to conduct this part of the research. Three of the interviews were held face-to-face, one was held through telephone and one through the Internet communication method Skype. The interviews that were held through telephone and through the Internet were mainly because of logistical reasons, a preference was toward
face-to-face interviews. All the interviews were recorded, with the exemption of the telephone interview; this was not possible due to technical circumstances. However, notes were made during the telephone interview to review the interview and to highlight the critical points (Saunders et al; 2007).
3.2 Case study analysis
In this paragraph, the case study analysis will be explained. The Dutch luxury fashion multi-brand retailer Company A was researched using a case study method. Company A has successfully expanded internationally to Antwerp, Belgium and is planning to expand even further into Germany and the UK. This method was used to research the issues Company A experienced when expanding to Antwerp and more importantly how they dealt with these issues. This can explain how a multi-brand retailer can overcome the barriers to
internationalization. It is used to answer the second part of the research questions: what barriers exist in the perception of luxury fashion multi-brand retailers and how can a luxury fashion multi-brand retailer overcome these barriers?
A case-study method was chosen for this research to analyze and focus on a single organization, namely Company A. There are three conditions that determine what research design is the correct one for the research intended. The first condition is the type of research question; the research questions are “why” and “how” research questions. “Why” and “how” research questions are most suitable for a case study, an experiment or a history analysis. Thus, the research questions fit with a case study design but are also suitable for other research designs (Yin, 2003).
The second condition is the extent of control over behavioral events. A behavioral event is an event where personal behavior can influence the event itself and its outcome. In this research there is no control over the event, there is no possibility for control or
manipulation. There is no control over the expansion of a multi-brand retailer and this can also not be manipulated. Therefore, according to the second condition a case study or a history analysis is the most suitable research method in this research (Yin, 2003).
The third condition is the degree of focus on contemporary as opposed to historical events. In this research, the focus is on contemporary events. The case study method has the advantage over the history method, because there is a possibility to collect data from
contemporary data sources, such as interviews with persons involved. Therefore, there is a preference for a case study method compared to a history method. Combining the three
conditions, it can be seen that from the first condition, a case study, an experiment or a history method are the preferred research methods. When also taking the second condition into account, a case study method and a history method are the preferred research methods. When also looking at the third condition, it seems that a case study method is the preferred research method. Therefore, a case study was chosen as the research method for this research (Yin, 2003).
Company A was chosen as a case study due to the following reasons. Firstly, it is a unique case; Company A is rare case since it is not common for multi-brand retailers to expand internationally. Secondly, it is a representative case, Company A is a common multi-brand retailer, and it fits in the basic criteria of a luxury fashion multi-multi-brand retailer and is thus a typical case of a luxury multi-brand retailer. Thirdly, it is a revelatory case, there was an opportunity to collect data, analyze and observe this particular organization, which was previously inaccessible to scientific research. As an intern at Company A, access was granted to this type of data and information. Therefore, Company A was a good case for this research Yin (2003).
Semi-structured interviews were used as a data collection method. The participants of these interviews were the board of directors of Company A. The board of directors was
chosen due to the top-down advantages that the board have. The advantages of a top-down approach are firstly that a top-down approach can oversee the entire organization from a few persons. The CEO’s have a good view from the top of what the capabilities and competences of the organization are. Secondly the direction and strategic intent set by the board are clearly set out and the opportunities are clearly identified. Lastly, an overall consensus at the top management is more common than a consensus on a lower level, thus a clearer straight line can be discovered in the policy and decision-making of the organization. The content and context is more strategically oriented instead of operationally oriented (Prahalad & Hamel, 1990; Marino, 1996). The questions were regarding Company A Antwerp, discussed were the initial perceived barriers and how they overcame these barriers, and the performance of Company A Antwerp at the moment. They were held face-to-face, fully recorded and lasted for about 45-60 minutes.
4 Results
In this section the results from the research will be discussed. Firstly, the expert analysis results will be discussed, theses are answers that are related to the first research question: why are luxury fashion multi-brand retailers not expanding internationally? It is dealing with the perceived barriers to internationalization from a perspective of a multi-brand retailer.
Secondly, the case study analysis results will be discussed; the case study was used to discuss the possibilities to overcome the perceived barriers to internationalization and to create success in international retailing for a multi-brand retailer.
4.1 Perceived barriers to internationalization
The first part of the research was an expert analysis to discover why luxury fashion multi-brand retailers are not expanding internationally. The interviewees were luxury fashion retailers in Germany and the UK; these retailers did consider expanding abroad, but decided not to. From the study of Jones Lang LaSalle (2011), the cities that were taken into account were London, Munich, Hamburg, Düsseldorf and Frankfurt. The experts were Clemens Wirschke Jr; CEO and co-owner of Company B in Düsseldorf, Interviewee G, CEO and founder of Company C in Hamburg, Interviewee H, partner of Company C in Hamburg, Interviewee I, store manager and previous head-buyer of Company D in Hamburg and Interviewee J, CEO and founder of Company E in multiple locations in the UK. The data received from the interviews are categorized and the full interviews can be found in the Appendix.
4.1.1 Local conditions
One of the most prominent factors mentioned was local conditions. All the interviewees mentioned local differences as a barrier to internationalization. Local conditions consist of several sub-categories such as local taste, local competition and cultural differences.
Local taste is seen as something very hard to adapt to, according to Interviewee F taste is different not only country-wise, but also city-wise.
“That is because the taste changes, you want to centralize buying, but you won’t export the same taste. That is why collections as Etro have totally different collections for Asia, Europe, Russia and so forth. You can’t have tastes that match perfectly.” - Interviewee F
This is also the case with brands. Different cities prefer different brands, so sometimes it is not only taste as in style, but also taste as in brands.
“Yes, well the brands that sell well in Amsterdam, are not the same as the brands that sell well in London” – Interviewee J
Another local condition that is very important is of course local competition. This plays a large role according to many of the interviewees and especially well established firms who are the go-to store in a city are very hard to compete with.
“The competition is very fierce everywhere, every city is full, you can’t just go in there. There is no room to go in there. You can’t just move in, because you developed a new concept. There is an old business that is very established. It is difficult to just get in, just to get into the marketplace. It is a full market.” - Interviewee J
“Company A, that is the go-to store of Amsterdam. Just like, if you are in New York and want to go to a department store you go to Barneys, because that’s the best. And you go to Harrods or Harvey Nichols in London. If you want to go to a concept store in Paris, you go to Colette. The city and the concept provide each other a certain aura and it is in a local context.” – Interviewee H
When entering a new market, you are also a new player. There is no reputation you can fall back on like in your home market. Local reputation is practically non-existent and you have to start from scratch.
“Louis Vuitton is a big name. If there is a multi-brand store, than you don’t know the name. You have to go inside and that is the reason why. The public relations and so on, that is why in the beginning it is easier for the mono-brand stores.” – Interviewee I
However, while the interviewee state that local conditions make it very difficult, some do state that it is possible to adapt to these local conditions, but it takes a long time and a lot of financial resources. This is an investment that needs a lot of consideration.
“But if one thinks that it is going to be hard to gain a good reputation, than he shouldn’t even consider expanding … But it is tough, it is a large challenge. And then in this point in time, you see what the economy is like, what customer traffic is like, what the sales are like, you have to think twice about this investment. Than you need locations, so if I would want to open up a store in Hamburg, it is going to be very tough to get the same brands that I am carrying here.” – Interviewee F
“It is a lot of risk and you need to make a very large investment. And you don’t know the outcome of the investment after a few years. And even than you need to be lucky if you have made a good return on investment.” – Interviewee H
“The learning curve is high there, that is the same learning curve you are going to have everywhere. It takes you longer, because you are an outsider coming in. And sometimes that time is going to kill you.” – Interviewee J
Thus, they initially state that local conditions are a barrier, but this barrier can be overcome. However, this costs a lot of time and investment, which might not bring back the
profits you need to have in order to survive. According to the experts, one of the critical success factors is the ability to adapt to local conditions. This might take a lot of time and effort and financial resources are of an essence to being able to survive during the start-up years.
4.1.2 Brands
What was very notable is that brands play a large role into international retailing. A multi-brand retailer carries several multi-brands and these multi-brands are also part of their store concept. However, not all brands can be sold in different markets. If other competitors have the rights to sell those brands than it is very difficult to sell them as well, which makes it very difficult to transfer your store concept. Several interviewees highlighted this as a very important point to focus on. Interviewee F and Interviewee J explain it well in their interviews.
“It is going to be very tough to get the same brands that I am carrying here. Because they are already going to be represented by other stores. Etro sells to a number of clients, represented by a different amount of stores. Etro sells to a fixed amount of customers per city. Santoni the same thing, Caruso, Fay, Malo, Moncler. City size is A, this means three customers, B four customers, C, five customers etc.” - Interviewee F
“When you are competing for brands, it is going to be extremely difficult. Because the local guy has possession of these brands. As a local guy, you are not going to take these brands off him.” – Interviewee J
This is also confirmed by Interviewee G, his explanation to this phenomenon is also related to mono-brand retailers. He states that the mono-brand retailers are growing more and
more. The brands are also seeing when they are doing well at multi-brand retailers in a certain city. When they see this, it is matter of time before they will open a retail location themselves. They have the brand power; they know that there is market and most of the time they are also backed by a major luxury conglomerate (Personal communication).
It is therefore very difficult for a luxury multi-brand retailer to keep your store concept alive, while at the same time not being able to carry all the brands that you normally do. Interviewee J explains that in his view a store concept is not the same if it does not carry the same brands.
“Well at the end you are not opening a Company E store, but you are opening a store that is called Company E, which has different brands. You can’t get the brands you want… You can keep the same concept, but it is not the same because you do not have the brands. If your store is built around ten brands who are very successful and you don’t get those, than you are not the shop that you are. You are something else, that doesn’t mean you can’t do it. But you are not opening a Company E, you are opening something else which is called Company E.” – Interviewee J
Thus, it seems that brands are very important for a luxury multi-brand retailer. The brands are part of the store concept and not being able to carry them in a foreign location is a barrier to internationalization.
4.1.3 Staff
Finding good staff that fits with the organization and knows the local market as well seems to be a barrier as well. Interviewee J thinks that staff is very important and that this is a barrier to international expansion.
“It is certainly more difficult to find and train proper staff. Yes, I think it is very difficult, but it is nothing unachievable, but more difficult. The distance makes everything more difficult. Because you don’t have a central hub, you don’t have a group of people who are effectively driving the organizational culture. The influence is lost. The key people are lost and it is very hard to endorse that.” – Interviewee J
Interviewee H thinks that it is very essential to success and that knowledge of the store concept and knowledge of the local environment is very hard to achieve.
“The problem is, for sure, that you need to find the right persons that fit with your concept, but simultaneously know how to serve the local market. It is a balancing act, which is extremely difficult.” – Interviewee H
The same goes for Interviewee F He even claims that the success of the retailer and the internationalization stands and falls with the staff.
“It stands and falls with your employees. Because I come here with the mentality that it is mine, so I do whatever it takes. Stores in our price range, also like Company A, they have customers that don’t need anything. You sell air, you sell emotion, and you sell a reward. The customer wants to reward himself for the hard work that they’ve done or who knows what. Even if they are filthy rich, it is still something that they don’t need. So you need to be able to carry that emotion, you need to have this, because this is something great and to carry it over to the customer. You can have the greatest store on earth, but if you don’t have people who can transmit that emotion, than you can never have great sales.” – Interviewee F
4.1.4 Management control
According to the interviewees, it is very difficult to manage a store and to control a store when you are not on location. Both Interviewee F and Interviewee J state that it is logistically very difficult and that it is a barrier to internationalization.
“The main reason behind that is that it is very tough to monitor. Different stores across large distances, we always try and we always try to have a very high standard. We don’t have a massive selection; we are not a Bergdorf Goodman in that sense… The logistics behind it, what if something happens and you need to solve a problem. You want to step on a plane? No, because you are too small. Even Braun who is a lot larger than I am, it is going to be very tough for them. To do that and to keep perfect check on everything. So what you do is, you try to have a very high standard, but you try to concentrate on what you do best.” – Interviewee F
“So it is a very difficult thing to do; you’re going to have to compete in a business that is a long way from where you are. You aren’t going to have the full control and you’re not there to understand it and you are not going to understand it, because the people who are working for you can’t explain it.” – Interviewee J
Interviewee G shares the same opinion; he even states that in his eyes the CEO still has the urge to be present in the store. He likes tight control on things and he cannot imagine how to run a store abroad, without having the possibility to be present all the time (Personal communication).
4.1.5 Internet
Another reason why luxury multi-brand retailers are not expanding internationally has to do with the Internet. The Internet has offered the possibility to reach out to international
customers, without being located in their city or country. Compared to not being able to carry your brands, this is not as much a barrier, but more an alternative for international retailing. The Internet is increasing the opportunity cost of expanding internationally through opening new retail locations. Interviewee H thinks that online retailing is a better option to expand abroad.
“You can reach a lot of people online. Many of these stores are active online and have worldwide delivery. J. Crew started with that recently in Europe, Colette is doing it; they are all doing worldwide shipping. Than you have solved the “staff” issues, because you can work from your own office and have a worldwide market … It also has less risk and less overhead costs. Every time you open a store, it needs a manager, it needs sales assistants, and all that has to be perfect. And those people need to do their work accordingly in a faraway city and you need to control that. All that is way easier on the Internet. Cheap rent for your warehouse and less expensive staff.” – Interviewee H
According to Interviewee F Internet retailing has a few advantages compared to regular retailing.
“Yes, but people have a great atmosphere at home. From the computer, they can do it in their boxers, in their jogging pants, in their sweatpants, on the pool. Why do they have to come here?” – Interviewee F
So it seems, that to some of the experts, the Internet is just a better option. Interviewee G also agrees on this, he states that online retailing is the future of retailing and that a focus on this is important. It is important to not miss this opportunity; not responding now means giving the competition a head start (Personal communication). This also goes for Company E’ CEO Interviewee J and Interviewee I.
“It is a very difficult thing to do, with the Internet and things like that you have access to fine countries anyway. We have an active Internet business, which is developing, so we want to develop that really. And we put a lot of our development time into the Internet. We are not really looking to expand our business retail wise beyond a certain point.” – Interviewee J
“I would also focus more on online, look at Louis Avia Roma. I was in Florence for the Pitti and it is a very little store, but everybody knows Louis Avia Roma online. I think that is great.” – Interviewee I
Experts are seeing the Internet as paving the way for their international retail
expansion. They have access to almost every country through the Internet, without opening a retail location in those countries. It seems that some luxury multi-brand retailers prefer this option of international retailing instead of opening new international retail locations.
4.2 How to overcome the barriers to internationalization
The case study that was held at Company A consisted of interviews about the
internationalization of the company into Antwerp, Belgium. The topics were barriers to internationalization and how to overcome these barriers. The case study analysis consisted of interviews with the members of the board of Company A: Interviewee A, CEO and founder;
Interviewee B, Chief Marketing; Interviewee C, Creative Director and Head Buyer;
Interviewee D, Chief Financial Officer and Interviewee E, Chief Operations Officer. The data was categorized and local conditions, brands and staff were also mentioned in the case study of Company A. Management control and the Internet were not mentioned in the interviews. The full interviews can be found in the Appendix.
4.2.1 Local conditions
Considering the first category from the expert analysis results, local conditions, the board of directors at Company A has the following to say. They too, believe that local conditions are very important and that adaptation is very important. Interviewee C describes how the Belgian customer was very different and how the store concept had to be adapted to the local needs.
“They (the Belgian customers) are very aware of quality, there is much love for it. And they are also willing to spend money on it. It is some sort of Atelier Italia what we have realized over there. All the more expensive brands sell well over there and it is also very special. They have more appreciation for luxury, rich and exclusive products.” – Interviewee C
Company A also experienced something else in Antwerp that was not noted by the experts. In Antwerp they experienced that the local competition conspired against them. They saw Company A as a common enemy and decided to stick together in their competition against Company A.
“I didn’t knew that there was going to be a fifth colony, a group that wanted to get you out of business…They wanted to conspire, but they did not succeed. Even better, we came out stronger. You also need an enemy, it keeps you on top of your game.” – Interviewee A
