Andrew Rosen, CEO of luxury brand Theory, which conducts more than 50 percent of its sales internationally, agreed that it's important for brands to adapt to local cultures. He said it's exciting for consumers to experience a brand they're comfortable with, but with a different country's cultural flavor.
International isn't always the answer
It's not only the risk of boring shoppers that challenges retailers looking overseas. According to a Deloitte survey, which analyzed 87 American-based specialty retailers over a 10-year period, shareholder returns were 20 percent higher for retailers who stayed focused on the domestic market versus those who expanded abroad.
One common reason behind a retailer's struggles was that it failed to adapt to local consumers' tastes. Deloitte called attention to one luxury retailer that entered Europe, choosing to sell the same handbags that had been successful in the U.S. What the company didn't realize was that European women lead a more pedestrian lifestyle, and therefore prefer smaller purses.
"Frequently, retailers believe their brand will resonate in all markets in the same fashion and thus fail to adapt to unique needs and preferences," Deloitte wrote in its report. "Retailers should recognize local market preferences and evaluate how to adjust messaging or product offering to that customer base, without compromising the integrity of the brand."
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Typically, investors react with hesitancy to retailers' decisions to go global. That's because the complexity and resources needed may outweigh the benefits, Deloitte said.
The firm also found that investors fear that retailers who look abroad for solutions will lose sight of their core, domestic business. This could cause the evolving tastes of the domestic customer to be overlooked.
Globalization goes both ways
Although global expansion offers opportunities to U.S. retailers, they aren't the only ones looking to outside markets for growth. Wells Fargo analyst Paul Lejuez said in a recent note that overseas competitors have already started to pressure a crowded domestic market, calling attention to H&M, Inditex's Zara and Fast Retailing's Uniqlo.