Retailing Business on International Platform - Essay Example

Retail and Service Marketing Retailing Business on International Platform Zhi Zheng ID: 4511656 Module Mahen Ramsurrun TABLE OF CONTENTS Introduction Retailers often operate in local as well as international markets. In some cases, some retailers may want to expand their businesses to international markets. However, the internationalization of the retail sector is not an easy task and the retailers need to plan well ahead to enter a foreign market successfully. One of the strategies that can make retail business an easy process is E-tailing. However, E- tailing is still in infancy stage and need to be developed further. The other mode of entry is franchising, licensing and among other ways. However, by merely opening stores abroad, retail business is not guaranteed to succeed. Elements such as pricing, promotion, store design and customer service need to be effective in order for international retail business to flourish. E- tailing Prospects E-tailing is a business model of retailing that takes place on the Internet. It started during the end of the 20th century and it involves business to consumer transactions. According to Rouse (2005), e-tailing began to work for some major corporations and smaller entrepreneurs as early as 1997 when Dell Computer reported multimillion dollar orders taken from its Web site. In e-tailing business model, special software tools are used for creating online catalogues and managing the retail business. This electronic retailing has taken retailing to a new level in western countries. In E-tailing, the consumer can shop for products and services through virtual shops in the comfort of their homes. The payment can be done through the Internet and the products are delivered to the customer by courier and shipping service. During the last 10 years, there has been a rise in E-tailing in western countries. Research has shown that there has been a growing trend in online retailing as shown by the case of Inditex which owns Zara. “Expansion into international markets is serious, with more than a third of its sales this year coming from China and the US, up 29% from a year earlier. Online now accounts for an increasing amount of sales, with 1.3 million people visiting the site every day,” (The Guardian, 2014). In the next five years, it seems e-tailing in the UK would have ballooned since there are high volumes of people turning to this model of business. In other parts of the globe, it seems that there is also considerable growth in e-tailing though the rate is slower than the UK. It can be In the Western world, there are a lot of E-tailing sites but the problem is that many companies are not yet conversant with this particular business model in other parts of the globe due to some of the following reasons. The main reason for this trend is that many facilities in the E-tailing are not compatible with the consumer interests in order for them to get attracted to this service. The transactions on certain web sites are a cause for security concern to consumers and the retailers need to make sure their websites and full proof. Sometimes, the E-tailing business process is not a smooth operation for consumers and many shy away from such websites. Many people attract customers but flawless delivery is a practice that needs to be maintained. Lack of basic infrastructure to support E-tailing especially in the developing world is another reason why this business model is still in infancy. Another problem is that payment process of transaction on E- tailing is more costly than that of normal purchase as the credit card companies take a percentage of money. Also, E – tailing does not ensure much privacy as the personal information provided by the consumer can be mishandled or exploited. According to News 24, (2014) “One of the main reasons why people don’t shop online is the fear for their cards being cloned. This is a possibility, but there are precautions you can take to make sure your transaction is a safe one.” The banking sector in other parts of the world does not support online transactions such as eBay and PayPal which are the commonly used method for making payments by the customers. Therefore, it is recommended that companies should upgrade their infrastructure in information and communication development before venturing in E-tailing business. There is likely to be considerable growth in this sector especially in the next five years since many businesses are adopting online business models in their operations. Modes of Market entry for retailers E- tailing is an important medium for international retailers; however there are other methods of market entry available to internalizing retailers. Some of the methods are as follows. For instance, the Wren Pink suit is found on London’s high street but it does not exist in a country located in Sub Saharan Africa like Mozambique. In order to successfully enter this market, Whistles shop, the manufacture of the brand should take the following factors into consideration. a) Export/import agents - Export and import agents or trading companies are an option for retailers to enter into international retail business. This is suitable for companies that have less exposure to international environment and this can significantly help the Whistles shop in its endeavor to penetrate international markets. These agents will give exposure to many international companies to the retailers. In such a way, the retailers have more opportunities to sell product to potential market. b) Franchising - Franchising is another market entry mode available for the Whistles. It is not a much explored way of marketing by retailers. This gives the vendors a viable way to introduce their products to the international market. Franchising Strategy Moderate level of Control Exchange of intangibles Dynamic and flexible Reduces perception of foreign firm. As noted by Holmes (2003) “among prospective owners and with the consuming public, franchise systems generally have a superior image over other distribution approaches, particularly if there is uniformity as to retail presentation, marketing methodology, operational compliance, etc., precisely the things which are easier to achieve within a franchise framework”. This can be a viable strategy for Whistles if it wants to capture a large market share in Mozambique where the brand would be very new. c) Licensing - Another mode of international market entry for retailers is the licensing method. This is suitable for vendors who have legally and protected assets and this can be utilized by the Whistles. In licensing, the vendors get the opportunity of media production and distribution. It is an effective way of entering foreign market. According to LIMA (2014) “Licensing is a marketing and brand extension tool that is widely used by everyone from major corporations to the smallest of small business”. Licensing Strategy Intellectual property protection Profitability Brand identity It is recommended that the Whistles should use the above mentioned strategies in order to launch its new brand in Mozambique where it is nonexistent. Customers can learn about the brand if they identify it with their own home brands. Success of international retailing Many business owners presume that internationalization is all about opening of stores abroad. A business cannot only become an international brand if it opens stores abroad. As such, business people need to understand and evaluate the long-term prospects of business before they open stores abroad. Therefore, expanding business alone cannot ensure a successful internationalization strategy for the organization. Zara is one good example of brand that has successfully penetrated international markets with about one third of its sales coming from online sales especially in China and USA. The pricing, quality and promotion of the products have an important role in internalization process of business. In a foreign market, price is an important element which can determine the success or failure of a firm. Price is a competitive factor as there are many products with cheaper prices in foreign markets. Pricing strategy Market conditions Competitor price Input costs Trade margins Please see Appendix 1 Zara’s prices are not very expensive while also not very cheap but they are affordable. Promotion is carefully utilized when carrying retail on line in international markets. Promotion in an international market needs to be innovative, creative, sophisticated to catch up with its competitor’s businesses. According to Khan (2011,pg 445) “There is a considerable change in the international business environment, which is said to be an environment of many challenges and many opportunities.” Promotional Strategy Advertising Selling Sales promotion Public Relation However, the main challenge for Zara to penetrate other markets is related to various social, economic as well as cultural factors. The international business needs to comply with laws and regulations of every country in which they conduct business. The more stores one open, the more chance for business to face legal complications. The international business needs to understand and comply with legal formalities regarding labor law, company law and other regulations. So these need to be considered while opening stores around world. Also, the financial stability of the business needs to be strong. The store design also needs to be taken into account in order to attract the customers. It is recommended that Zara should use both online and offline strategies in order to penetrate other international destinations successfully. Customer Service and Retailing There are various methods that can be implemented by international retailers in order to gain a competitive advantage through customer service. Basically, in any business, whether local or international, customers form the back bone of the organisation. It is often said that “customers are king” and they need to be treated with respect and dignity. According to Times 100 (1995) “Good customer service involves developing bonds with customers, hopefully leading to long term relationships” It creates advantages for both customers and the business alike. Customer service means understanding the emotions and preferences of the customer and acting in accordance to the needs and interests of the customers. For instance, customer service can be created through Carrie Skirt brand which is found on the high street. The marketers need to take into account all the interests and needs of the customers so that they can operate profitably. This helps the organisation to generate more revenue since the customers can identify with it. This entails that customer service needs to be better than the competitor, so that more customers are drawn to business. The customer nature and behavior changes according to nations and these factors need to be considered by an international retailer. According to Dumon (2013) “When it comes to the business world, customer service is one of the most important aspects of having a successful business”. In international retail business the customer service is even more important as the competition is fierce. The business needs to make use of all skills and tactics to make it a success. A firm that is responsive to the needs and interests of the people is likely to operate viably in the international business environment since the customers can develop trust in that firm. In case of the Carrie skirt, the customers can also be given promotional offers, discount and other loyalty service that can make them loyal to the company which is the basic tenet of customer service. According to Stefani (2013, p. 103) “When we have satisfied our customers, they not only help us grow by continuing to do business with us, but recommend us to friends and associates as well.” Anticipating the needs and demands of customers can enhance the customer service impact for the Carrie Skirt brand. As noted by Dawn (2011,pg 101-15), customer service is meant to “To attract and retain the customers, the retailers particularly the E-tailers have to take more efforts than to just attract. It is very easy to lose an e-customer than to gain them.” Therefore, understanding the needs and complying with demands of the customer is a good sign of a competent international retailer. The competitive edge of any business is customer service. Essentially, the needs and interests of the customers should be fulfilled so that they can continue doing business with the company. In order to improve customer service through the Carrie Skirt brand, it is recommended that research about the needs and interests of the people should be carried out first. Please see Appendix 2 Conclusion Any business is faced with many risks and complication and retailing in an international market is quite challenging as a result of the existence of fierce competition that exists. The retailers many a times, need to take support from others to flourish in the foreign market. A retailer needs to take advantage of E-tailing, other market entries, and business strategies to succeed. Retailers also need to take care of the customers through qualitative customer service. Responding positively to a customer can win over him at any cost. In most cases, a customer may choose another product mainly due to the attitude of the store employees and owners. Therefore, good customer service is the basic tenet of successful business especially in an international environment where the company operates. References Arnold,D. 2003. Strategies for entering and developing international markets. [ONLINE] Available at: http://www.ftpress.com/articles/article.aspx?p=101588&seqNum=2. [Accessed 17 February 14]. Constanza, B, 2004. AN INSTITUTIONAL PERSPECTIVE ON. International Review of Retail, Distribution, and Consumer, 14/2, 149-69. Dawn, S.K, 2011. E-TAILING IN INDIA: ITS ISSUES, OPPORTUNITIES AND EFFECTIVE STRATEGIES FOR GROWTH AND DEVELOPMENT. International Journal of Multidiscipli nary Research, 1/3, 101-15 Dumon,M. 2013. Why great customer service is important. [ONLINE] Available at: http://www.examiner.com/article/why-great-customer-service-is-important. [Accessed 17 February 14 Holmes, D. 2003. THE ADVANTAGES AND. [ONLINE] Available at: http://www.holmeslo fstrom .com /z_pdf/articles/franchisors/Fran%20Advantages.pdf. [Accessed 17 February 14]. Khan, N, 2011. Crisis in International Business Environment in India. Journal of Emerging Trends in Economics and Management Sciences, 2/5, 445-49. LIMA. 2014. Introduction to Licensing. [ONLINE] Available at: http://www.licensing.org/education/introduction-to-licensing/. [Accessed 17 February 14]. Mehra, A, 2011. Competitive Advertising Strategies for Online Retailers. UNCC, 3/8, 1-16. News 24. 2014. eTailing: Good or Bad. [ONLINE] Available at: http://www.news24.com/MyN ew s24/eTailing-Good-or-Bad-20140131. [Accessed 17 February 14]. He, S, 2011. The Influential Factors on Internationalization of the SMEs in China. Research in World Economy, 2/1, 48-57. Rouse, Margaret. "e - tailing." http://searchcio.techtarget.com. Tech Target, 2005. Web. 18 Feb. 2014. . Stefani,A. 2013. Five Essential Elements for Great Customer Service. [ONLINE] Available at: http://www.destinationcrm.com/Articles/Web-Exclusives/Viewpoints/Five-Essential-Elements-for-Great-Customer-Service-90458.aspx. [Accessed 17 February 14]. The Guardian. 2014. Fashion on the British High street:Loosers and winners. Times 100. 1995. Using customer service to position a business.[ONLINE] Available at: http://businesscasestudies.co.uk/first-direct/using-customer-service-to-position-a-business/what-is-customer-service.html#axzz2tfyjjj4s. [Accessed 17 February 14]. UDEL. 2004. Definition of Retailing and its application to E-tailing. [ONLINE] Available at: http://www.udel.edu/alex/online/market5.html. [Accessed 17 February 14]. William, A. 2011. The 5 elements of retail customer service. [ONLINE] Available at: http://2bbiz.co.za/blog/2011/07/the-5-elements-of-retail-customer-service/. [Accessed 17 February 14]. Appendix Appendix 1 Pricing strategy Appendix 2 Customer service strategy Read More