DDi - January 2013 - (Page 56)
56 | Shopping with Paco
Coming to America
cross both the Atlantic and Pacific oceans, merchants are looking longingly at American retail real estate. Even the sovereign wealth firms look at aging malls in great locations and ask: “Is it time to take the purchasing plunge?” Yet, the road to making it in retail in the United States is a complicated and peculiar process. There are very few successful foreign retailers in North America. Some luxury goods brands appear to be, but many have simply tied their fortunes to department stores and have prospered in this league, but suffered in their stagnation. Zara and Mango have come of age gently, almost as place-keepers, as their Spanish parent company expanded furiously in easier markets. Zara’s parent Inditex owns five banners, but American consumers wouldn’t know it. Even foreign-import success stories, such as H&M and IKEA, had serious bumps along the way. Disconnects occur in everything from location to sizing. Early on, IKEA was losing customers because its bedding and other basic household items were in Swedish sizes and did not fit the standard American beds. Americans also found that the assemble-it-yourself packaging was occasionally missing a bolt or two, or that the instructions were not always printed in English. Fast-forward to today, as IKEA’s Red Hook Brooklyn, N.Y., location boasts hourlong lines; and when IKEA opened across from Newark Airport, the New Jersey Turnpike was backed up for hours as curious customers flocked to the store.
The last 25 years have seen countless foreign retailers misfire in the United States.
Remember the Galeries Lafayette department store in what was then the GM Building? Asprey of London in the Trump Tower? How many tens of millions of dollars did Sephora burn on blue-chip locations in Manhattan before getting it right? Even UNIQLO squandered dollars and oodles of time on locations in New Jersey before it went back to the drawing board. But from scratch, the retailer was able to develop its SoHo location, which many brokers felt they overpaid for at the time, but wound up a winner; and their Fifth Avenue flagship and 34th Street stores followed suit. Success or failure can be hard to detect at first for any foreign player. Think of Dapy, the French design store, that came in the ’80s and took a decade to die. Tesco recently announced that it plans to sell all or part of its Fresh & Easy chain. Royal Ahold picked the banners it acquired poorly. Prêt A Manger is doing better, but it took them 10 years to adjust to an American appetite. Max Brenner, the chocolate chain, thought they were going to give Cheesecake Factory a run for their money, but instead, it is just barely holding on to its three American locations. Speaking of cheesecake, here is a simple recipe for invading the U.S. market. If you need to do your market research in an American city, start in Chicago. It is more the epicenter of American shopping than any other city. Avoid New York; it is its own separate country. Moving your brand to a New York location should be the icing on the cake. Look at the example of the domestic success of Trader Joe’s, which was everywhere before New York. Work out your problems and systems removed from the critical public eye, and in places where mistakes are more easily forgettable and cheaper to fix. Also, landlords are not impressed with New York stories. Mainstream America shops in shopping malls—and Short Hills and South Coast Plaza are not typical. Building a roll-able retail
brand is about succeeding first in the mall. I admire the Pyramid Group’s Palisades Center in Nyack, N.Y.—one big successful mall willing to write short leases. And there are others. American landlords like to see prototypes in places where the transference is easy: places like Georgia, Texas, Florida and even Indianapolis are perfect for a first try. Perhaps, most importantly, don’t assume that if you have a big luxury brand in Europe that wealthy Americans are going to necessarily know it or want to buy it. The worst mistakes are about controlling the details of a U.S. launch from an offshore office. The visual merchandising and marketing cannot be controlled from London, Paris or Tokyo; they hinge too heavily on local factors. Believing your own press releases is a universal issue, and so is over-estimating the sophistication of the American shopper. If you want a place in the American consumer’s shopping trip, let your team here work their magic keeping these ideas in mind. Further, understand your brand in context and don’t ignore the low-hanging successes. Nando’s is a South Africa-based rotisserie chicken chain, known for its über-hot Peri-Peri sauce. The chain functions today in 27 countries, mostly in Africa and the Middle East. Its recent decision to come to the United States was based on a simple demographic fact: where in the country they’d find the greatest concentration of Africans who were already familiar with the Nando’s brand. The answer was Washington, D.C., and its suburbs. I love eating at Nando’s. I know I’ll have to wait to do it in New York. Is this the time to come to the United States? Yes. But, you better have deep pockets, lots of patience and be willing to understand who’s going to shop your stores, who is not—and why.
—Paco Underhill is the founder of Envirosell and author of the books “Why We Buy,” “Call of the Mall” and “What Women Want.” He shares his retail and consumer insights with DDI in a bi-issue column.
Table of Contents for the Digital Edition of DDi - January 2013
DDi - January 2013
Table of Contents
From the Editor
From the Show Director
Great Dane Furniture
Retail Design Collective
Shopping with Paco
DDi - January 2013