For some months now, brokers have been telling us that U.S. retailers see limited opportunity for growth stateside and are increasingly gearing their strategies toward overseas expansion. The trend began to take root even before the recession, but a global downturn and limited availability of capital put expansion of any kind on the backburner for many chains.
Now, the latest news from Walmart, which is trying to acquire a Russian chain store, confirms that retailers are once again looking at growth opportunities in Eastern Europe and the Pacific Rim. Many would like to build up portfolios in BRIC countries, but opportunities abound outside the big four as well. A CNBC story explains the market forces at play.
The issue with entering foreign markets, however, is being able to adapt to local tastes and customs. Foreign consumers often shop differently than Americans do. A few years back, for example, Walmart had to exit Germany and South Korea because it could not compete with local chains, both on prices and on cultural awareness (Germany expected to see more employee protection on the part of the retailer). So even if the demographics in a foreign country are right, a successful expansion still requires a great deal of research into the habits of the local population. Here's hoping the retailers who are looking overseas have learned that lesson.