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What Will It Take to Thrive in the Global Arena?

Key Learnings and Insights from Global Best Practices

What Will It Take to Thrive in the Global Arena?

• Two strategies seem to dominate the global expansion race:– Expansion of mass market retailers in fast‐developing countries– Expansion of “specialized” retailers with strong brands

• Innovative concepts and methods are needed to exceed customerexpectations in the global arena

• This session will feature results and insights from a study(conducted by Ebeltoft Group) evaluating retail internationalizationtrends

• Mango and Delhaize will share their perspectives and lessonslearned during the execution of their company’s multi‐nationalexpansion plans

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So You Want to be a Global Retailer? All You Need to do…

Deal With National, Regional & Local Laws & Restrictions

Account For New & Entrenched Competition

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Perfect Supply Chain Strategies…in Very Different Market Conditions

Understand Local Consumer Tastes & Preferences

Adjust Pricing, Promotions, Merchandising & Mix

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Select the Right Real Estate

Transfer Company Culture & Expectations Across Countries

…No One Said It’s Going to Be Easy

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But Global Remains Where The Growth Is…

Results reflect Top 250 retailers headquartered in each region/country. *Compound Annual Growth Rate. Source: Published company data and Planet Retail

Sales growth and profitability by region/country (%)

5.7

15.4

7.6

3.55.5

4.2 4.4

7.4

14.9

5 4.95.3

9.3

4.7

1.5

5.6 5.6 4.9 5.2

19

4.7 4.73.8 4 3 2.13.7 3.3

1.33.7 4.7 4.1 4.1

0

5

10

15

20

2005‐2010 Composite retail sales CAGR 2010 Composite retail sales growth 2010 Composite net profit margin

Retailer 2010 2015International turnover 

CAGR % 2010‐15Domestic turnover CAGR 

% 2010‐15

9.8% 2.7%

7.7% 3.2%

10.5% 5.9%

7.4% 1.6%

Retail Leaders are Driving Higher Growth Internationally…

Source: IGD Research and estimates. Note: Red = international turnover %,  Blue  = domestic turnover %

74

26

4159

67

33

3961

6238

67

33

3664

33

67

Source: MD

Despite Some Costly Mistakes Along the Way

ENTRIES

EXITS

ChileIndia

South Africa

BulgariaIndiaIran India

EgyptKazakhstan

RussiaGermany

South Korea

RussiaAlgeria

Thailand

JapanUSA?

Morocco

Market Entries and Exits of Top 4 Global Retailers

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So, How Do We Improve the Odds?

Global Ebeltoft Group Study: Methodology

• 18 Countries

– 12 Developed Markets

– 6 Emerging Markets

• 8 Retail Sectors

• 92 Retailers

• 127,170 Stores

Internationalization in Developed Retail Markets Varies Considerably

85% 85%

77%

68%

60%55% 54%

51%

40% 39% 37%

29%

0.24 0.33 0.24

1.49

3.57

2.43 2.77

0.84 0.64

GDP $ trillion

1.741.37

DenmarkSingapore AustraliaNetherlandsUK FranceGermany SwitzerlandCanadaUSASpainPortugal

Developed retail markets: average percentage of international stores

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Most Retailers Tend to Penetrate Similar Markets First When Expanding Internationally

Domestic

Developed

Emerging

Analysis of the location of stores within the retailers’ portfolios 

74%

9%

16%

43%

39%

18%

54%

29%

17%

Emerging MarketsDeveloped MarketsAll Markets

Internationalisation has Escalated in the Last 3 Years % change in number of international and domestic stores  over 3 years

International

Domestic

Developed Markets

Emerging Markets

All Markets

Keys to Success

Store locations

Local adaptation

Product realization

Entry mode

Local management

Suitability of concept

Competitive opportunity

Competitive pricing

Marketing

Technology systemsFailure

Success

1

3

5

7

9

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Keys To Success (Or Avoiding the Path to Failure)

1. Have a clear reason for being (anywhere)

2. Listen (really) to the customer and have leadership flexibility 

3. Partner (Acquire/JV) with Local Leadership & Talent: respect local culture

4. Execute on great retail: well‐defined real estate strategy, marketing, systems and infrastructure

Have a Clear Reason For Being…

Success FactorsHornbach succeeded in The 

Netherlands by having an all‐in‐one offer of DIY under 1 roof.

FNAC succeeded in Portugal with its added value model.

Hollister succeeded in UK  by creating a sense of belonging and exclusivity.

“Identify your points of difference. What does your brand do thatfew other companies do. This could be a product attribute, brandequity or a mark of quality.”

Austin Reed / Burberry, UK

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Listen (Really) to the Local Customer: With Flexible Leadership

Success StoriesStarbucks succeeded in China by changing its format to suit local 

behavior patterns.

Media Markt succeeded in Spain by allowing local management autonomy.

Lidl succeeded in France by offering French national brands, alongside their 

private label products.  

“ Aldo’s success comes from understanding the consumerat the local level. We are looking for localdifferences…there is not much difference in the productsand style for Italy, France and Canada, but there are bigdifferences between UAE, Asia and Canada.”

Aldo, Canada

Failure FactorsDressman failed in Denmark due to heavy local competition and three changes of CEO 

since entering the market.

Wal‐mart failed in Germany due to acquiring two local chains, Wertkauf and Interspar, but dismissing almost all of the 

existing staff.

G’Market failed in Romania because its parent company’s attention was diverted to 

other businesses.

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Partner (Acquire/JV) with Local Talent & Leadership

Success FactorsCrate & Barrel succeeded in Canada by 

training staff to “educate” their customers in product knowledge.  

Tesco succeeded in South Korea by partnering with Samsung and having 

great local leadership

Zara succeeded in Turkey because it offers its sales staff better benefits.  

“Everything is about people. You can’t have a greatproduct without great people. We employ a trulyinternational team of people, not just Dutch. The boardconsists of a variety of people with different backgrounds.”

Hunkemöller, Holland

Failure FactorsBest Buy failed in UK because its large store showroom format felt dated to 

the consumer. 

Carrefour  failed in Portugal by building stand‐alone hypermarkets.

Carrefour failed in USA because the stores were much larger than the US 

customer was used to.  

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Execute Great Retail: Real Estate, Systems, Marketing

Success StoriesZara Succeeded in Turkey by cutting 

good deals with owners of the best and most frequented shopping malls.

Sephora Succeeded in USA by partnering with JCPenney.

Topshop Succeeded in Australia by choosing adjacencies next to other 

global brands.

“ In 1991 we opened our first store on Tverskaya Street(the premium Moscow shopping street) and this is stillour best store in terms of turnover today.”

Yves Rocher, France

Lidl succeeded in France by expanding aggressively.

Kaufland succeeded in Romania by continuing to open stores and invest in distribution centers.

McDonald’s succeeded in Singapore by expanding into less concentrated and competitive suburban areas.

“ It’s not about planting flags all over the world; it’sabout making clearly defined decisions about whichmarkets you want to dominate, and go in and dominatethem.”

Hunkemöller, Holland

Success Stories

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Keys To Success (Or Avoiding the Path to Failure)

1. Have a clear reason for being (anywhere)

2. Listen (really) to the customer and have leadership flexibility 

3. Partner (Acquire/JV) with Local Leadership & Talent: respect local culture

4. Execute on great retail: well‐defined real estate strategy, marketing, systems and infrastructure

And We Hear From the Retailers Themselves…Mango and Delhaize

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MANGO AT A GLANCE

MANGO AT A GLANCE

100% SPANISH CAPITAL

1984 FIRST MANGO/MNG STOREON BARCELONA’S PASEO DE GRACIA

SECOND-LARGEST EXPORTER IN THESPANISH TEXTILE SECTOR

MORE THAN 2.500 MANGO/MNG STORES IN 109 COUNTRIES

11.000 EMPLOYEES WORLDWIDE

OVER 2.500 STYLES EVERY SEASON

100 MILLION ARTICLES PRODUCEDEVERY YEAR

100% SPANISH CAPITAL

1984 FIRST MANGO/MNG STOREON BARCELONA’S PASEO DE GRACIA

SECOND-LARGEST EXPORTER IN THESPANISH TEXTILE SECTOR

MORE THAN 2.500 MANGO/MNG STORES IN 109 COUNTRIES

11.000 EMPLOYEES WORLDWIDE

OVER 2.500 STYLES EVERY SEASON

100 MILLION ARTICLES PRODUCEDEVERY YEAR

19841984FIRST MANGO SHOP INPASSEIG DEGRÀCIA, BARCELONA

FIRST MANGO SHOP INPASSEIG DEGRÀCIA, BARCELONA Barcelona, Spain

19921992MANGO BEGINSGLOBALEXPANSIONWITH STORES INPORTUGAL ANDFRANCE

MANGO BEGINSGLOBALEXPANSIONWITH STORES INPORTUGAL ANDFRANCE

Porto, Portugal

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19951995MANGO.COMIS CREATEDMANGO.COMIS CREATED

19981998MANGO POSITIONSITSELF AS SPAIN’SSECOND LARGESTTEXTILE EXPORTER

MANGO POSITIONSITSELF AS SPAIN’SSECOND LARGESTTEXTILE EXPORTER

20022002CONTINUEDEXPANSION INTONEW MARKETS: AUSTRALIA, BULGARIA, CHINA& ITALY TUNISIA

CONTINUEDEXPANSION INTONEW MARKETS: AUSTRALIA, BULGARIA, CHINA& ITALY TUNISIA

Rome, Italy

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20052005MANGO TOUCH ISDEFINED AS A NEWFASHION VENUEDEDICATEDEXCLUSIVELY TOACCESSORIES

MANGO TOUCH ISDEFINED AS A NEWFASHION VENUEDEDICATEDEXCLUSIVELY TOACCESSORIES

Barcelona, Spain

20062006MANGO ENTERSTHE US MARKETMANGO ENTERSTHE US MARKET

New York, USA

20082008H.E. BY MANGO IS CREATED, AIMED AT THEYOUNG, FASHION-CONSCIOUS MALE

H.E. BY MANGO IS CREATED, AIMED AT THEYOUNG, FASHION-CONSCIOUS MALE

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20082008MNG BY MANGO STARTSCOLLABORATIONFOR SHOP-IN-SHOPWITH JC PENNEY

MNG BY MANGO STARTSCOLLABORATIONFOR SHOP-IN-SHOPWITH JC PENNEY

200920093RD EDITION OFEL BOTÓNAWARD TOSUPPORTYOUNG TALENTIN FASHIONDESIGN

3RD EDITION OFEL BOTÓNAWARD TOSUPPORTYOUNG TALENTIN FASHIONDESIGN

REASONS TO EXPAND

REASONS TO EXPAND

DIFFERENT TAX REGULATIONAND LEGAL STRUCTURES CANBE AN ADVANTAGE FOR YOURBUSINESS.

DIFFERENT ECONOMIC CYCLESDEPENDING ON THE AREA CANBENEFIT YOUR EXPANSION.

DOMESTIC MARKETS OFFER ASTRONGER COMPETITION ANDA LIMITED NUMBER OFOPPORTUNITIES.

DIFFERENT TAX REGULATIONAND LEGAL STRUCTURES CANBE AN ADVANTAGE FOR YOURBUSINESS.

DIFFERENT ECONOMIC CYCLESDEPENDING ON THE AREA CANBENEFIT YOUR EXPANSION.

DOMESTIC MARKETS OFFER ASTRONGER COMPETITION ANDA LIMITED NUMBER OFOPPORTUNITIES.

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DIVERSIFYDIVERSIFYYOUR RISK IS NOTCONCENTRATEDONLY IN ONEMARKET

YOUR RISK IS NOTCONCENTRATEDONLY IN ONEMARKET

HOW TO PREPAREHOW TO PREPARE

STUDY HOW NATIONALAND LOCAL LAW ANDREGULATION CANAFFECT YOUR BUSINESS

MARKET RESEARCH FOREXISTING & POTENTIALCOMPETITION

STUDY HOW NATIONALAND LOCAL LAW ANDREGULATION CANAFFECT YOUR BUSINESS

MARKET RESEARCH FOREXISTING & POTENTIALCOMPETITION

ADAPTADAPTYOUR SUPPLYCHAIN TO LOCALMARKETCHARACTERISTICS

YOUR SUPPLYCHAIN TO LOCALMARKETCHARACTERISTICS

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UNDERSTAND & ADAPTUNDERSTAND & ADAPTYOUR PRODUCTAND MARKETSTRATEGY TOTHE LOCALCONSUMER

YOUR PRODUCTAND MARKETSTRATEGY TOTHE LOCALCONSUMER

ADJUSTADJUSTPRICES, PROMOTIONS, PRODUCT, ETC. TO THENEW MARKET

FOR EXAMPLE, SPECIAL COLLECTIONFOR COLD ANDTROPICAL COUNTRIES

PRICES, PROMOTIONS, PRODUCT, ETC. TO THENEW MARKET

FOR EXAMPLE, SPECIAL COLLECTIONFOR COLD ANDTROPICAL COUNTRIES

ADAPTADAPTSPECIALCOLLECTIONFOR ARABCOUNTRIES

SPECIALCOLLECTIONFOR ARABCOUNTRIES

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ADAPTADAPTSPECIALCOLLECTIONFOR ARABCOUNTRIES

SPECIALCOLLECTIONFOR ARABCOUNTRIES

COLLABORATECOLLABORATEWITH LOCALPARTNERS TOSELECT THE RIGHTLOCATION ANDEXPANSIONSTRATEGY

WITH LOCALPARTNERS TOSELECT THE RIGHTLOCATION ANDEXPANSIONSTRATEGY Tokyo, Japan

CHOOSECHOOSETHE RIGHTBUSINESS MODELFOR YOUFRANCHISE STORES:

CONSIGNMENT

OUT RIGHT PURCHASE

THE RIGHTBUSINESS MODELFOR YOUFRANCHISE STORES:

CONSIGNMENT

OUT RIGHT PURCHASE

Aurillac, France

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CORPORATE STORESCORPORATE STORES

Milano, Italy

ONLINE SALEONLINE SALE asos.com

moderepubliek.nl

TRAVEL RETAILTRAVEL RETAIL

Barcelona, Spain

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SHOP-IN-SHOPSSHOP-IN-SHOPS

Chavannes, Switzerland

TURNOVER DISTRIBUTIONTURNOVER DISTRIBUTION

Europe 65%Europe 65%

Asia 17%Asia 17%

Africa 2%Australasia 1%Africa 2%Australasia 1%

North & South America 5%North & South America 5%

Middle East 10%Middle East 10%

Forecast 2012Forecast 2012

EXPANSIONEXPANSION

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Globalization, success or failure?

Denis Knoops

SVP Affiliated Retail & New Markets

• Revenues* €22.6 billion

• EBITDA €1.4 billion

• Net Debt / EBITDA 1.9x

• Rating

• BBB- / Baa3 with stable outlook

• Stores 3.388

• 75% supermarkets

• 25% convenience stores

• Countries 11

• Employees 158.000

• Selling m² 5.5 million

Delhaize Group

All figures as of September 30, 2012

United States:- Stores: 1.550- Revenues: € 14.6 bn

Belgium:- Stores: 834- Revenues: € 4.9 bn

Southeastern Europe (SEE) & Asia:- Stores: 1.004- Revenues: € 3.2 bn

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Delhaize United States

All figures as of September 30, 2012

• Is the largest market for Delhaize Group• Total Group Revenues:

* 65% come from the 5 U.S. banners* Operating along the East coast * From Maine down to Florida* Covering 18 states

All figures as of September 30, 2012

Number of Stores

Area

Surface range (sq.ft.)

Number of Products

Leading supermarket chain in the

Southeastern U.S.

Regional supermarket

operator in rural areas in Georgia

and Northern Florida

Low-cost supermarket in

Philadelphia and Pittsburgh

Inspiring healthy choices

for life in the North East

Fresh supermarket in

Florida

1.138 73 53 181 105

Southeast and Mid-Atlantic

Georgia, Northern

Florida, South Carolina

Maryland, Virginia, North Carolina,

Pennsylvania, New Jersey

Northeast West coast of Florida

25.000 - 45.000 25.000 - 45.000 18.000 - 20.000 25.000 - 55.000 25.000 - 50.000

15.000 - 20.000 15.000 - 20.000 6.000 - 8.000 26.000 - 46.000 28.000 - 42.000

Description

Delhaize Belgium

• A multi-format food specialist

• 834 stores, 16.500 associates

• Focus on fresh food, convenience & service

• Leading position with market share of +/-25% (1)

• Balance of company-operated and affiliated

stores

(1)  Source: AC Nielsen, Dec 2011All figures as of September 30, 2012

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All figures as of September 30, 2012 except number of employees as of June 30, 2012

Romania

Greece

Bulgaria

Albania

Montenegro

Bosnia and Herzegovina

Serbia

equivalent to UK

Market of

55 million people 

equivalent to UK

908 stores atthe end of Q3 2012

Combined presence in 

7 countries

30.300 30.300 employees  

Delhaize Balkans

• Strong regional position in the Balkans

• Serbia: 360 stores

• Greece: 266 stores

• Romania: 153 stores

• Bulgaria: 42 stores

• Other: 87 stores

• 51% Joint Venture in Indonesia• Stores concentrated in major cities (Jakarta, Bandung)

• Number of stores:* 96 stores at the end of September 2012* 15 store openings in 2012* Faster expansion in coming years

• 5.357 associates as of June 2012

Delhaize Indonesia

Globalization

• Why does it work ?

• Why does it fail ?

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Globalization

Why do no grocery retailers operate in all 5

of the biggest markets ?

• Walmart Not or no more in continental Europe?

• Tesco Not or no more in continental Europe?

• Carrefour Not or no more in US ?

Why ?

2 theories about globalization

NOT YET >< NEVER

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Globalization (1st theory)

• Takes time

• Global is new

• All industries move into that direction

• Economy of scale

NOT YET

‘NOT YET’ globalization

Success

• Synergies < differentiation

• Global efficiency < local effectiveness

• Global suppliers no interest to help

• Diseconomy of scale (local scale > global scale)

• Bureaucracy

Globalization (2nd theory)

NEVER

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‘NEVER’ globalization

Success

Back to Delhaize

Sometimes we succeed

• Number 1 in Bucarest

Romania

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Indonesia

Sometimes we succeed

• Number 1 in Jakarta

Greece

Sometimes we succeed

While operations in Greece are resilient

• Our profitability is stable• Market share is improving• Proactively managing the risks10%

12%

14%

16%

18%

20%

22%

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

2006 2007 2008 2009 2010 2011 2012

Market shares*

The source of the market share data is Nielsen

Thailand

Sometimes we fail # stores

Time1998

1

35

2003

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Republic Czek

Sometimes we fail # stores

Time1991

1

100

2008

Magic Recipe ?

?

Global is powerful

however

Local is beautiful ...

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The Future Is Already Here.It’s Just Unevenly Distributed.

WILLIAM GIBSON

Get in touch:

Ebeltoft GroupBalmes,109 5º2ª08008 Barcelona, SpainTel.: +34.93 452 73 39ebeltoft@ebeltoftgroup.com

www.ebeltoftgroup.com

e

e-Q&A

Text NRF2013 and your question to 22333

Tweet @poll NRF2013and your question

Go to www.pollev.com and type NRF2013 and your question

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