Moving from the UK to a new market is something in which Nicki Doggart, the former US CEO of luxury British chocolatier Hotel Chocolat, has plenty of experience. An American who studied for her MBA in the UK, Nicki was recruited by Hotel Chocolat to take their prestige British brand to the US. Following her success she founded 41 North, a consultancy firm aimed specifically at companies hoping to break into the US market. Her experience taught her that research must take account of more than just processes and legislature.
Nicki cites the well-publicised example of Tesco, a powerhouse British brand that failed to account for basic cultural differences between the UK and the US. “Tesco spent a lot of money in learning about the market, and hired in anthropologists to understand consumer behaviour and to identify gaps in the market, as well as dieticians to advise on American products,” explains Nicki.
However, the company failed to take account of the basics, such as the fact that it’s often cheaper to eat out in the US than it is to eat in. Also, many of the neighbourhoods where Tesco placed their ‘Fresh & Easy’ stores were those in which the locals are more likely to seek specialist foods rather than milk and a loaf of bread. “There’s a reason why there’s a gap in the market,” says Nicki. “And that’s because local businesses have had problems addressing it.”
In Nicki’s experience, demand is a critical factor in selecting a potential market. “If you have received queries from other markets where you can see a demand, or there are signs that the market is developing and becoming a high-growth market, then that’s a market to consider,” she says.
The wider environment must also be taken into account when evaluating a possible gap opportunity. “The US market has markedly different behaviours in the urban, suburban and rural areas,” says Nicki. “There’s a rich diversity across the vast country, even from a climate perspective.”
Such regional differences in temperature had a marked effect on business when Nicki was leading Hotel Chocolat into the US. The average daytime temperature in Arizona could easily melt a shipment of confectionary, while temperatures in Alaska could freeze it into an inedible block. Regulating these differences required either chilled or insulated wrapping, which in turn meant variations in the price of distribution and packaging. Such elemental differences between locations can have a huge impact on a business, but are easily forgotten when a company focuses mainly on desktop processes such as payment procedures or currency analysis.
Nicki believes research can always benefit from viewing a market in terms of its people. “The buying behaviour in different countries can be very different,” she says. “In the UK people shop frequently and the basket size is small, whereas in the US they don’t shop as frequently but the basket size is bigger, and then in the Middle East the basket size is 10 times larger.”
Same but different
Having conducted comprehensive research, selecting a distribution channel for export may require an entirely different approach. “Some of the channels to market that you may not have considered in your domestic market may well be the best channels in this new territory,” says Nicki. “In a big country like India, China, Brazil or the US it may not be appropriate to have flat-rate or free shipping. Because moving a product from one end of the country to another is going to be markedly more expensive.”
Simply put, similarities can be deceptive, especially when dealing with an English-speaking market. “On the surface, the markets look a lot like your own market, but, by not understanding the differences, businesses won’t know how that impacts their profitability.”
A case in point is in not understanding the complexities of local legislation and basic costs such as delivery and local taxes, employment legislation, and duties. “In the US taxes and duties can differ drastically from state to state,” says Nicki. “Employment laws are decided at a state level rather than a federal level. Whereas in other countries you have different work-weeks where it’s not Monday to Friday, and you need to work out what that means for your business.”
A successful export example
For longer-term success it may make sense to start small, initially entering a market in a specific region, or via a specific channel before branching out further. As Nicki points out, one successful attempt at the American market was made by sandwich chain Prêt a Manger, who engaged local expertise to educate them about the market and to be their eyes and ears on the ground. “You need to understand where your best fit is, and then take a realistic and focused approach to gain a foothold and establish a platform for your business, which you can then turn into a platform for growth.”
The last piece of advice Nicki has for budding exporters is to embrace help and to look to a combination of ‘market navigators’ like tax advisers, patent attorneys, strategy and brand agencies. You’ll also need trusted advisors to work with on the ground who will be able to save time and money in the long run by helping you get it right first time.
Five business lessons:
- Every market is different – Don't simply apply your favourite business formula to your new market.
- Understand the market landscape – Both the market dynamics, including consumer behaviour, values, profile, competition, and channels to market, as well as the business environment at national and local levels.
- Same but different – Be open-minded and respond to market differences across the business without sacrificing what makes your brand unique.
- Stay focused and realistic – For longer-term success it may make sense to start small, initially entering a market in a specific region, or channel to market before branching out further.
- It's OK to ask for help – Recognise that you are not an authority on all things within a new market.
When you’re an established business, recruiting top talent in all the areas you need can seem like a never-ending challenge.
If you’re a start-up or small business, how can you put together an attractive employee package to appeal to top talent – graduate and…
More than one million incidents of financial fraud occurred in the first six months of 2016, according to official figures released by…
Santander’s Head of SME International Mark Collings discusses why exporting to new global markets may provide businesses with new and…