In order to support one of Europe's key economic sectors, the European Commission has drafted a series of practical and effective best practices and recommendations to help member states formulate their retail policy.
Nearly one in ten people works in the retail sector, which comprises more than 3.6 million companies. Retail generates 4.5% of the EU economy's added value, and absorbs up to one third of household budgets. It is an important source of economic vitality and a leading employer, but retail is experiencing tough times. Between the power grab by large store brands and the expansion of digitisation (via e-commerce), competition is rampant for small retailers. Yet the potential of the sector remains huge for retailers who manage to embrace change, especially with regard to evolutions in consumer behaviour and the way products are bought (and sold). This is a vital test for the fabric of the EU economy and its labour market.
A guide for national authorities
The EU appears to have grasped this, since the Commission has just published a best practices guide to modernising and revitalising retail. "Facing the future" contains advice and success stories and is designed to be instructive. Its primary function is to provide help and support to local and regional authorities in member states, enabling them to implement measures promoting innovation, productivity and competitiveness in the retail sector. They can then create a favourable climate for their SMEs (often very small, family firms) to continue to grow by seizing the opportunities of today, especially those offered by technology.
Progress needed in a range of areas
The Commission has identified three major aspects of retail where member states can make progress in this regard. Firstly, it wants the creation of retail outlets to be made easier, especially by reducing undue or disproportionate charges and by simplifying the procedures involved. Secondly, EU countries are encouraged to alleviate restrictions associated with the day-to-day operation of stores. These concern the promotion of sales and discounts, own sales channels, opening hours, specific retail taxes, carrying out transactions within the EU, etc. Finally, the Commission is urging member states to adopt innovative solutions to support the vitality of city centres.
One guide, six measures
"Facing the future" highlights six measures that local and regional authorities should put in place to achieve this:
- Improve digital and public infrastructure, in particular in order to encourage retailers to take on board new technologies.
- Share the "right" kind of information with retail outlets, in societies where data is becoming an increasingly essential tool.
- Help to build strong communities based on working together.
- Remove the barriers to working with digital technology, to help retailers remain competitive and adapt to changes in the market. The Commission identified Digital Wallonia's "Commerce Connecté" project as an example.
- Support the development of knowledge and skills, especially with regard to new technologies and improving the customer experience.
- Provide guidance on marketing and communications to help retailers enhance their profile.
It should also be noted that the document highlights the "Shopping in Flanders" strategy put in place by the Flemish government in 2012. As a final point, the guide suggests a method for assessing the current national situation in the sector, and a process for evaluating the impact of measures in place.
To find out more, read the "Facing the future" guide.
Where will your 'international' roadmap take you?
Assessment? Check! Your strategy? All mapped out. You've also already determined your target market. But you've still got some way to go before you can cross borders... Some 'required stops'.
You're fully convinced of the benefits of internationalisation by now. You see it as an important lever for the growth of your business. But it's a process that doesn't happen overnight and is the result of a long decision-making process. You've carried out a preliminary assessment of your options before venturing into foreign markets. A checklist and initial indispensable considerations, so to speak, to find out whether the project was worthwhile. You then considered the choice of the most appropriate strategy for your business... You considered direct solutions such as e-commerce or commercial distribution. Or perhaps more sustainable establishment models, such as opening a branch or subsidiary, implementing synergies through a joint venture or a merger acquisition. This decision is based on a thorough analysis of the situation specific to your organisation. This approach often requires meticulous guidance. You will have also determined your target market during this process, which is a very important step. Your project's success now depends on the implementation of an action plan. And this phase inevitably brings with its new considerations and decisions...
NO SUCH THING AS ONE SIZE FITS ALL
In any case, your plan depends on your internationalisation strategy. The launch of an e-commerce platform or the choice of an intermediary imposes different requirements – in terms of due diligence obligations, financial resources or the definition of the target market, for example – than a merger acquisition. What's more, every merger-acquisition process is unique. What does this mean? That each adventure requires a tailor-made approach that considers the specific characteristics of your company, your products or services, your sector, your competitors, your added value, and more. Furthermore, the mapping of your international growth will be highly influenced by the characteristics of the target market. No magic formula then? Correct, but we do point out some common 'required stops' that deserve your attention.
1. The 'local' considerations
France is not Belgium. And Belgium is not Germany and certainly not Japan or Brazil. Each country has specific characteristics that shouldn't be taken lightly. It's more than 'folklore'! These are real 'keys' that you must assess correctly in order to make a difference. Numerous (internationally renowned) companies have come to grief while trying to do this. It's another commercial reality that can have a major impact on your action plan:
- Cultural codes and language
- Relationships with partners
- Corporate culture
- Consumer habits and expectations
- Do’s and don'ts
- Don't lose sight of the regulatory aspects: they're essential!
Note that a product that is successful in the domestic market will be perceived differently elsewhere. It will prompt you to take certain preliminary actions: call in experts from the country in question, carry out a more in-depth market study, participate in more local trade fairs, etc.
2. Adaptation of your commercial range
An important reflection that causes you to reassess a series of parameters:
From a commercial point of view: do your products and services meet the target group's specific needs? Does your range satisfy the previously identified needs? Is it sufficiently appealing? How will you position yourself? Does the quality meet the local standards? And so on.
From a legal point of view: the key question is whether you comply with the local market's regulatory or administrative requirements. Do you need special certifications? Do you have to comply with specific technical obligations? And so on.
You must answer these questions to determine whether your market access strategy is ready in all respects: marketing and communication, value proposition, distribution methods, logistics chains, payment methods, etc. Not to mention your pricing policy. It may show that you need to make some adjustments at the production, distribution or commercial level.
3. Choice of partner
This isn't an easy task. Whatever your internationalisation project, this point plays a key role. You therefore need to set very clear objectives, missions and criteria that will serve as a guide to identify, prequalify and select the best local partners. The risk – and therefore the importance – of this approach is even greater in the case of a merger acquisition. A long-lasting marriage that must not fail... You will therefore need resources and time to complete your due diligence process.
4. You still have a way to go...
The following steps are no less important. We can give you the following tips in the meantime:
- Carryout a thorough risk analysis.
- Prepare a budget for your expansion project and ensure you work out several scenarios, because you can always come up against surprises. Consider the fiscal context and the local market's specifications (infrastructure costs, employment costs, etc.).
- Plan distribution and transport circuits.
- Prepare a detailed schedule for your project's roll-out.
Internationalisation: which strategy should you apply?
Conquering international markets is an indispensable growth lever for companies. Such a project can take different forms or follow different paths: from e-commerce to mergers and acquisitions.
International expansion can be an important growth factor for your company and an undeniable source of opportunities – both commercially and in terms of innovation or resilience. After a complete assessment of your current situation, an inevitable question follows: which strategy should you apply to realise your project? There's no magic formula or mapped-out path: in reality, you often adopt a wide-ranging approach based on various strategies. Nevertheless, we do see some broad outlines. And each has its own strengths and limitations. Whatever you decide, your choice should fit into an overall thinking and be in line with the current situation and the future of your business. The objective? Increasing your chances of success and keeping the risks under control as much as possible.
1. Direct and indirect export
This is naturally one of the most widely used strategies for conquering foreign markets. You can sell your products abroad through one or more channels:
- E-commerce: E-commerce is a fast and accessible solution to get 'far' with limited resources. Internet sales have grown very strongly in recent years but have a significant impact on the logistical workload. This includes not only technology and conformity, but also the commercial aspect. You are far from your target market and must deal with competitors from all over the world, while the internet knows no borders – and that's both an asset and an obstacle.
- A local intermediary: A gamble without too many risks, because you make use of the power of local sales – your agent delivers the customer's orders locally and you transfer them. The only thing left to do is to decide how to distribute your products. In this regard, it's important that you make full use of your knowledge of the foreign market. Think, for example, of consumers' consumption habits and expectations. Although this approach does not require major investments (payments on commission), it isn't entirely without risk. The success of your project is entirely in the hands of your local contact, leaving you to count on that partner's reliability.
- Commercial distribution: A similar approach to conquering the international market. This strategy can be implemented quickly and is the result of cooperation with independent distributors who are based in your target area. They buy the goods and then sell them, enabling you to benefit from their expertise and network. Unlike the intermediary, this distributor takes several tasks off your hands (invoicing, collection, marketing costs or import costs). Choosing the right partners and determining the terms of the contract is no easy task. After all, your project's success depends on it...
- Transfer of patents or technology: This is a way to make your know-how or technology pay off, not your products. This transfer of skills gives a foreign entity the right to use your methods or innovation within the framework of a previously established contract (geographical area, duration, etc.). An opportunity to go international where you 'outsource' production, sales and distribution. Contract preparation is one of the stumbling blocks of this approach.
2. Local establishment
Another model for internationalisation is to establish your business abroad. This means that you go local: you establish your entire value chain in another country, or you produce, distribute or sell your products there yourself. This geographical approach necessarily requires greater investment, but it also gives you more clout. This approach is also a way of reinforcing your resilience: the financial and commercial risks, as well as the pressure on your value chain, are spread over several areas. Over the years, a more flexible approach has also been introduced, allowing companies to move more flexibly in line with the international situation. Various options are also available here:
- Subsidiary or branch: In both cases, it's a matter of establishing a firm and lasting foothold in the local market. However, the project requires a solid foundation and a long-term vision. You should also think carefully about the legal status: do you opt for a subsidiary or for a branch? Consequently, when making this decision, take into account various factors: the degree of autonomy, the desired degree of decentralisation or consultation, the legal and tax implications, whether or not to produce locally (to take advantage of cheaper raw materials, for example), the financial resources that you can mobilise, and so on. In any case, a perfect lever for applying the well-known formula 'think globally, act locally'.
- International joint venture: This principle is based on the creation of synergies. Your company joins a company that already has a local presence and both companies complement each other. Each company benefits from the other's strengths while sharing the activity's risks, control and common costs. Such a joint venture or partnership often requires a customised legal structure. As you can see, a joint venture is not an easy marriage. It's therefore crucial that you find the right partner and come to an agreement with them concerning each party's input and responsibilities.
- Merger or acquisition: This growth strategy offers a few advantages. What's the greatest advantage? A merger or acquisition is a method of consolidating and diversifying your business. It's also a 'quick' way to conquer a new market by exploiting the local company's competitive advantages (technological, commercial, etc.). Such a project naturally entails not only potential benefits, but also risks. For example, you may misjudge the sources of value creation or the risks, or have difficulty integrating.
As you can see, your international project's success depends on many factors. And, first and foremost, on your own strategic choices and your ability to develop a clear vision of exactly what you want to achieve. From the development of a commercial partner network to a sustainable local presence, there are many options that deserve not only thorough consideration, but also professional guidance.
A full 'assessment' before you go abroad
We can no longer deny the benefits of internationalisation. But is your business ready for it? A thorough assessment to measure your project's success is therefore a must before you cross the border.
Just because your business is doing well in our country doesn't mean that you can just jump into the export market. An international breakthrough is an important strategic (and necessary) choice that requires extensive preparation. The first step is to take a detailed look at the state of affairs of your company. Because that way you can:
- Highlight your strengths and success factors: a specific skill, your expertise, your brand image, etc.;
- Identify your weaknesses: both internal (poor knowledge of the target market, need for funding, etc.) and external factors;
- Prepare your structure for 'new' demands: in terms of human resources and in financial, organisational, legal or commercial terms;
- Draw up your roadmap: make the necessary changes, maximise your assets and find the right solutions for your weaknesses.
A COMPLETE TOOLKIT
Such an assessment is not market research in the literal sense of the word, although some elements will eventually overlap or complement one another. The assessment should also enable you to gain insight into existing opportunities (competitive advantage, commercial trends, etc.) and threats (changes in legislation, major competition, etc.). To do that, you must be able to look at your foreign target group with the necessary distance.
There are many tools for this. Examples include the SWOT analysis, Porter's five forces model, the Boston Consulting Group matrix or the PESTEL analysis to measure the influence of macro-environmental factors. So, feel free to use those tools, but also remember the importance of step-by-step guidance.
A MUCH-NEEDED SELF-ANALYSIS
Give attention to different elements. To achieve a relevant assessment, you must also find answers to a series of important questions:
- Create your 'identity card'
Take an unbiased look at your organisation. What are your values, culture, references, image, etc.? How are you perceived by others? Does your positioning match your identity? Through these questions, you'll also gain insight into the reasons for your successes and failures on the international market. It's interesting to repeat the positive points and learn from your mistakes.
- Analyze your position on the domestic market
Take stock of your commercial position. Examine the evolution of your recent results and your weighting in your segment (market share, competition, degree of dependency, etc.). Find out what stage your products and services are in (launch, growth, saturation or decline). Next, you can consider your market's prospects and future: how will it evolve? A very important question at a time where the challenges of the sustainable transition are radically changing many sectors.
- Assess your products and services
Each country has its own specific obligations and standards. So, ask yourself whether your products and services are 'compliant', both commercially and legally. Perhaps you need to adapt them? Or maybe your production or delivery method needs to change (e.g. to respect the cold chain and guarantee reasonable delivery times)? In other words, are you ready for the step from a commercial point of view?
- Lay bare your capabilities
If you want to conquer foreign markets, you must be able to cope with that growth rate on an operational level as well. Can you increase or adapt your production capacity to the new demand? Are you ready for that in terms of supply and logistics? Also take into consideration the reliability of your partners and suppliers. And don't forget that your inventory will increase, and you must also have guarantees in that regard as well.
- Examine your financial situation carefully
Going international means a big investment for your company. So, take a close look at your finances and see whether you have enough funds to bring the project to a successful conclusion. You need these resources, for example, to launch commercial initiatives locally (while waiting for the first revenues), to 'transform' your company in the necessary areas, to support your activity in your own country or to recruit additional staff.
- Carry out an analysis in the area of human resourcesTo export, you need qualified and skilled staff (production, sales teams, communication, after-sales service, R&D, etc.). You may also need to train staff or recruit new talent with international experience. Although internationalisation can be an extra motivation for your employees, it will also require additional efforts from them. So, don't lose sight of the 'human' factor either!
This complete audit of your structure gives you everything you need to make the right choices. Have you got the commercial strengths, the human and financial resources, the operational capabilities and the necessary experience to take the step? Do you need some extra support to adjust certain parameters? Or are you postponing the launch to find the right solutions for some weak spots? The adventure can begin once you're ready!
Export plans? Make sure you talk to our experts first
To prepare your international adventure properly, ask yourself the right questions and talk to people who have done it all before: partners, customers, fellow exporters and experts.
BNP Paribas Fortis listens to the questions asked by international entrepreneurs and offers reliable advice. "A lot of exporting companies ask for our help when it's too late", Frank Haak, Head of Sales Global Trade Solutions, says.
Entrepreneurs with little export experience are often unaware of the bigger financial picture. So what do they need to take into account when they set up a budget for their export plans?
Frank Haak: "Budgeting and pricing are affected by a lot of crucial factors: working capital, currency exchange risks and currency interest, prefinancing, profit margins, insurance, import duties and other local taxes, competitor pricing and so on. We always advise customers or prospects to start from a worst-case scenario. Quite a few companies are insufficiently prepared for their first international adventure: they see an opportunity and they grab it, but quite often disappointment and a financial hangover are not far away.
Our experts have years of export experience and the BNP Paribas Group has teams around the world. This means that we can give both general and country-specific tips. Let's say a machine builder wants to design and manufacture a custom-made machine. We recommend including the machine's reuse value in the budget: can this machine still be sold if the foreign customer suddenly no longer wishes to purchase it or if export to that country becomes impossible due to a trade embargo or emergency situation?"
What type of companies can contact BNP Paribas Fortis for advice?
Frank Haak: "All types! Entrepreneurs are often hesitant to ask for advice. Sometimes they are afraid that it will cost them money. However, the right advice can save them a lot of money in the long run. For example, we recommend a letter of credit or documentary credit to anyone exporting goods to a foreign buyer for the first time. This product is combined with a confirmation by BNP Paribas Fortis to offer the exporter the certainty that it will receive payment when it presents the right documents and to assure the buyer that its goods or services will be delivered correctly."
The consequences of not seeking advice: what can an exporter do in case of non-payment without documentary credit?
Frank Haak: "If you are not receiving payment for your invoices, the counterparty's bank can be contacted in the hope that it advances the payment on the customer's behalf. However, we shouldn't be too optimistic in that respect: the chances of resolving the issue without financial losses are very slim. Once you have left your goods with customs, you usually lose all control over them. Hence the importance of good preparation: listen to and follow the advice of your bank and organisations such as Flanders Investment and Trade (FIT). It will protect you against a whole host of export risks."
BNP Paribas Fortis
- is the number one bank for imports (approx. 40% market share) and exports (approx. 25% market share) in Belgium (according to the statistics of the National Bank of Belgium): it offers advice/financing and can help you to discover new export markets through trade development;
- is proud that Belgium is one of the world's 15 largest export regions and is pleased to give exporters a leg up, for example by sponsoring the Flemish initiative ‘Leeuw van de Export’.
Source: Wereldwijs Magazine