Expanding a retail company to the North American market is not a simple task.
No matter how much a company manages to establish itself, it is necessary to meticulously understand the consumer profile of their product, which marketing strategies should be used to keep the brand on top and how to give continuity through good management.
The difficulties faced by companies are so many that the mission of ReachOut Business Solutions, a consultancy I founded to help with the internationalization and establishment of companies in the US market, it is precisely this. Show the best way for retailers who need help.
Next, I quote some examples of retailers, to show that it is possible to obtain success in the United States using a good strategy.
From Yoga studios and convenience stores to major supermarket chains in the country, today coconut water can be found almost anywhere in the US firmly stacked in corridors and in refrigerators. At the top of the billion-dollar industry is Vita Coco, a successful brand that holds more than 40 percent of the coconut water market.
But it was only a little more than a decade ago that Vita Coco and its competitor, Zico, decided to enter the highly competitive beverage industry. With only one or two weeks apart, Vita Coco and Zico began selling almost identical brands in Manhattan, New York – resulting in what would later be called “coconut wars”. Vita Coco finally came out victorious, but it was by no means an accident.
In the beginning, both Vita Coco and Zico used guerrilla marketing tactics to obtain space on the shelves in New York. They caught the attention of the consumer taking their products directly to their public – Vita Coco gave samples from a blue truck while women danced with Hula-Hoops on the streets and Zico had university teachers taking refrigerators filled with coconut water. They also focused on independent stores, instead of national chains that are more difficult to pursue and demand thousands of dollars in placement fees. Mike Kirin, cofounder of Vita Coco, visited 40 different grocery stores every day to convince their owners to sell his coconut water, while the founder of Zico, Mark Rampolla, managed to get all four seats of Bikram Yoga NYC to carry his product. There seemed to be a tie between the two competing companies until the largest non-alcoholic beverage company in the world entered the game.
Coca-Cola, which owns more than 40% of the soft drink market, paid 8 million dollars for a 20% participation of Zico (they finally bought the remaining shares from Zico in 2013). At the beginning, it was a major setback for Vita Coco, but this made them turn the game around.
They raised 5 million dollars selling an additional 10% of the shares to celebrities like Madonna, Demi Moore, and Rihanna and sold a 20% stake to the investment firm Verlinvest, whose portfolio includes Vitaminwater and Leblon Cachaça. Finally, Vita Coco signed with Dr. Pepper Snapple Group, the third largest beverage distributor in the country. This ended up being a turning point for the brand. Since Dr. Pepper Snapple had a small portfolio, they were able to make Vita Coco a priority – it was difficult for Coca Cola to manage a brand as small as Zico. This became an advantage for Vita Coco, which was able to win more shares of the billion dollar market than any other coconut water company, making $ 420 million in global sales by the end of 2014.
This illustrates how very popular and common goods like coconut water, can be transformed into a successful and commercial product in the USA.
Across the street of famous luxury brands like Salvatore Ferragamo and Versace, on the busy 5th Avenue, in New York, is Zara, the flagship of the chain of clothes and accessories stores from the world’s largest retailer, Inditex. Known for its minimalist and stylish design stores, for clothing and accessories inspired by the catwalks, Zara is the pioneer in so-called “fast fashion”, term used to describe a market model that manufactures clothes and accessories in a quick and cool way to capture the latest trends in fashion.
Currently, Zara has more than 2,000 stores around the world, with a growing number in the United States, a smart step, given by a company based in Spain. Being the largest market of clothes and accessories in the world, the United States reaches 28% of the world’s total, with a market value of around 331 billion dollars.
With more than 5,500 retail locations around the world, it is likely that you have seen or heard of other stores: H&M, Forever 21 and Uniqlo. Zara’s fierce competitors, they also create quick and cool copies especially aiming at the population growth of the Millennium. But in terms of speed and quality, no one can beat the dominant royalty of fast fashion, Zara.
And for those who think that after establishing a retail brand in the North American Market that the game is won, it’s not all flowers.
The iconic three stripes brand of Adidas is globally recognized. The multinational sport brand from Herzogenaurach, Germany dominated the market of American sport shoes during the 70s, when the Adidas sneakers were used by everyone in all of the American streets. From 2002 to 2013, Adidas saw the value of their stock price quadruplicate and its outstanding position in the sport shoe market in the United States created expectations for continuous success. However, in 2014, Adidas lost its stability in the competitive market of sport goods. Its stock price had a 38% drop when compared to 2013, and its sales informed in 2014 in the value of 2.97 billion of EUROS, in the United States was 7% lower than 2013 sales. However, according to an article in the Wall Street Journal, in March of 2015, Nike, its famous competitor presented a 10% increase in 2013 and informed 12.3 billion dollars in sales in the 2014 fiscal year in the United States.
Today, Adidas struggles to maintain its position in the United States, which has 40% of the world tennis shoe market and 100% of the global tennis shoe culture. The first misstep of the brand began at the top with the tension between the executives of Adidas in the United States and Germany, with the Germans wanting to exert excessive control over the Americans. Since the German executives don’t understand the American culture as their American colleagues, the brand ceased to be attractive in the target market. A noteworthy example of this was not offering, in the 80s, the sponsorship to Michael Jordan, who was supposedly interested in being sponsored by Adidas when becoming a Pro. Although, at the time, American executives were totally in favor of the idea the German executives allegedly didn’t believe the target market would have a connection with the extremely high basketball player. This left room for Nike that currently doesn’t only sell the extremely popular Jordan line, but holds a 90% share of the American retail market for basketball shoes, despite the agreement made by Adidas with the National Basketball Association (NBA). So, from the beginning, Nike saw what Adidas didn’t, that the American market chooses tennis shoes according what the stars of the sport pick to use.
As shown above, first of all, it’s necessary to evaluate if your product will be relevant to the North American Market, know the buyers and prepare a marketing strategy that strengthens your brand. To pay attention to the competition is not a flaw, on the contrary, it’s an opportunity to improve in the market. Before cutting investments, even of the face you want to see stamping your brand, it’s worth thoroughly studying the attitude so it does not become expensive up front, as is the case of Adidas, which strives to reconquer the market.
This article was first published on O Negócio Do Varejo (The Retail Business).
