AA in India
Having chosen India as a possible business target, there are many factors to be considered, as it is one of the countries with emerging economies, and retail markets in such countries are very different from the ones in developed countries.
Reddy (2008) divides hardships for foreign retailers in India into two kinds – “demand-side and supply-side challenges”.
The demand-side challenge is connected with peculiar social structure of Indian society and its buying possibilities. Before opening retail shops there, it is worth taking a deeper insight into the peculiarities of the markets involved and preferences of their customers. It is an indispensable part of competition in fast-growing markets, as you need to overcome local enterprises’ opposition, who have an advantage of sharing the mentality of the local people and, therefore, understanding their consuming psychology (D’Andrea, Marcotte, & Morrison, 2010).
Being outsiders, foreign businesses often lack research on “how emerging market shoppers think, what they need, what they crave, and how they buy” (D’Andrea et al., 2010, p.1). This may lead to launching a line of products, which turns out useless or unappreciated in countries outside America or Europe. Local chains often oust foreign rivals from the big game by being more authentic and understanding in products the specific communities or areas need.
Most customers in countries with developing economy make decisions about what to buy right in the shop (e.g., 45% in China versus 24% in the USA) (D’Andrea et al., 2010). These figures show how different the market is in comparison to the developed countries, and it seems advisable to get to know these markets better before getting into them.
In order to analyze the peculiarities of market in developing countries, a research conducted by D’Andrea et al. (2010) in 2009 can be used, which was targeted at 6 large retail companies in China, Poland, Turkey, Brazil, South Africa and Peru. The given study “explains the challenges these retailers have encountered in catering to the emerging market consumer and shows that the solutions they’ve come up with offer important lessons to multinationals” (D’Andrea et al., 2010, p.1). It also points out the most generic problems and solutions topical in every developing country.
The peculiarity that lies at the core of every developing country is its specific demographics, namely the absence of clearly outlined demographic middle. Unlike the classic pyramid-like social structure of developed countries, emerging economies influence the structure of societies in the way that there are some very rich people, and then there are not at all numerous representatives of the upper middle class, which is followed by the majority of middle and lower classes (D’Andrea et al., 2010). Therefore, “customers buy the cheapest or the best” (D’Andrea et al., 2010, p. 2). Focusing on the basics, people tend to buy most of the cheapest things and only a bit of the expensive ones, while the middle-priced goods are out of their range of purchases. For developing countries products are bought for use not for status, therefore, people are looking for the cheapest price possible with the best quality possible as well.
Another difficulty for multinational retailers in emerging countries is the speedy change in demographics and economies there. New social and economic phenomena require swift reactions and adaptations from retailers (D’Andrea et al., 2010). They need to meet the new needs of their customers, adjust the existing facilities in correspondence with new demands of the clients.
As for the supply-side difficulties, one of the challenges is to find an affordable real-estate for your business. Prices are very high in fast-growing countries (Reddy, 2008). Next factor to be mentioned is transportation. It is often a far cry from being sufficient and working properly. Thus, finding the right location with convenient transport connection is another obstacle for opening retail shops or at least a rather challenging task.
High import duties are also preventing foreign businesses from getting a firm footing in India. Profitability is much endangered by the sky-high tariffs.
However, in their research D’Andrea et al. (2010) offer not only the listing of possible obstacles, but also available solutions for them. One of the remedies suggested is aiming low. As a rule, retailers enter emerging markets with ready-made designs aimed at middle class. After being baffled by the absence of demand in this sector, they try to alter the exciting models and ideas to fit new circumstances, which is effort, time and money-consuming. Instead, it is recommended to target the products at the lower class from the very beginning and producing special lines for their needs rather than trying to adjust the classic goods. Cheaper textiles and accessories of nonetheless decent quality and fair price are a must in developing countries. No status motivation can convince people to purchase expensive clothes there.
Instead of trying to educate the customers and teach them American or European standards, it is crucial for foreign retailers “adapt to consumers’ habits” (D’Andrea et al., 2010, p. 3). The slogan “the cheapest and the best” should be in the centre of every new retail business opened in India and other developing countries.
Retail shops must also have a great choice of products to satisfy the inexperienced buyers. Even if new designs require much space and leave little space for stocking, retail shops should boast variety in order to show the customer every possible good. Salesmen should also be trained to cater for the needs of the client and educate them in terms of product knowledge.
Care and concern can win over the most distrustful and suspicious customers. It will attract more and more people to the stores and help to fight the existing bias against foreign retailers (D’Andrea et al., 2010). Loyal customers can be won only by special treatment. Service is often everything. Thus, special attention should be paid to the HR part of business. Special offers, flexible products’ return rules and many other loyalty programs also add to the popularity of the business. Customers like to feel that they are put first.
There are many other ways to make the customer feel respected, valued and secured. Text messages with special offers, salesmen checking customers’ details in their database and calling them by name, even name-tags of the salespeople themselves can be attracting crowds of customers. Psychologically every person wants to be appreciated, and it is not only the goods they are looking for, but also nice and kind attitude.
D’Andrea et al. (2010) claimed that “quality and reliability” should be in the focus of every foreign retailer (p. 4). Safety is also important. Customers prefer to know what textiles and materials were used to produce a certain goods, which makes salespeople’s product knowledge a top priority.
Foreign shops are often avoided by locals, as something strange or hostile. Thus, stuff should not only be friendly and knowledgeable, but also culturally educated, tolerant and respectful. What is more, multinational retail shops can be educating for local people as well. If salespeople are versatile and interesting interlocutors, there is much they can teach their customers. Some companies even use screens with broadcasting of news, English-speaking programs, educational articles and videos, etc.
As for supply-side difficulties, one of the Reddy’s (2008) interviewees objectively said that “India's challenges are the same as they are around the world: marketing, advertising, creating a constant demand for their products to keep them 'hot'”. High duties are compensated by the immense opportunities of fast-growing economy and broad customer foundations, which have not been yet seduced by other foreign brands and with proper approach can become devoted to your very company.
In conclusion, India as a developing country may become a bonanza for American Apparel and its retail shops’ plan. However, to win success and love of the customers, there are many factors to be considered. Emphasis on the lower class demands plus a bit of high end products is a perfect combination, unlike European and American pyramid distribution of goods. Quality and affordable prices, special low-cost clothes lines would win over great numbers of customers. Nice attitude of well-educated staff is crucial to make people loyal to the brand.
In the nutshell, the best advice of D’Andrea et al. (2010) for a retailer like American Apparel is to focus on “nimbleness” (p. 4). Being flexible and customer-oriented is the only way to let go of classic sales strategies and adjust to evolving needs of the developing society of India. It is important to take into consideration all the possible extra expenses and the necessary price decrease, but at the same time mind the wide range of opportunities, which can be found nowhere else but in developing countries.
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