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Unit 3: International Retailing: Internationalization and Globalization

limited, more recently a more proactive stance has been taken. Prominence has been placed Notes
upon the notion that retailers actively seek opportunities outside the home market, regardless
of the potential for growth within it. Both the direction of expansion (choice of host market) and
the method of entering a market are considered. Emphasis is placed upon the different
requirements of retailers operating in different sectors and with various retail offers.
Prior to examining the nature of the contemporary global retail arena, we will discuss the
factors changed to promote the modern global retail environment. Manufacturers and retailers
are at opposite ends of distribution channel. They may also be viewed as dichotomous in other
ways. Until recently, manufacturers have dominated retailers within the channel of distribution.
For example, Coca-Cola, as a supplier, has had the advantage of utilizing the expertise of
overseas distributors familiar with local consumer attitudes and preferences. However, retailers
faired less well. US players such as Sears had major problems in Belgium and Spain, and JC
Penney was not successful in Italy and Belgium. Many of the problems of these US companies
have been related to their lack of awareness of the European consumer. In fact, the problems
have been multifaceted. There was a lack of awareness of the consumer market and the retail
infrastructure.

Measures of Retail Development

The number of employees per retail business or per store are also increasing since traditional
retail businesses are characterized as small scale, and employ few people per outlet and per
company. As the retailer develops, the size of the store tends to increase, as does the number of
outlets per business. Hence, more developed retail industries have more employees per business
and more employees per store.
A more general measure of prosperity and development in a market is the proportion of consumer
expenditure that goes on retail. As the population is more wealthy, a greater proportion of
income is spent on non-essentials, thus a smaller percentage of total spend goes on food and
clothing (although the actual amount may increase) and a higher share of spending power is
directed towards non-essentials such as holidays and leisure activities. This is exemplified by
the fact that in Germany some 28 per cent of consumer expenditure went through retailers,
while in Portugal a much higher proportion, some 60 per cent, was accounted for by retail
(Retail Intelligence, 2000b).
Tordjman (1995) has divided the markets of Western Europe into a four-stage matrix of structural
development. The advanced markets of the UK and Germany are characterized by having the
highest levels of concentration and a clearly segmented market. Next and the structured markets
of France and the Netherlands, followed by the globally markets of Spain and Italy and, finally,
the traditional retail structures of Portugal and Greece. Rather than regarding these is unchanging
distinct phases, it is perhaps more useful to consider these markets as being as different points
along a continuum of retail development.

Figure 3.1: Retail Structure from Advance to
Traditional in Countries

More advanced More traditional
UK Germany France Netherlands Italy Spain Portugal Greece

The retail environments of former centrally planned economies (CPEs) may appear similar to
other developing markets whereas there are fundamental differences. For example, the Russian
retail industry is based on a legacy of a supply-led, not a demand-led, economy. Retailing has

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