Starbucks (SBUX), Sephora, and Tommy Hilfiger are some of the retail chains that have opened flagship retail stores in international locations the past thirty days and in doing so have revealed a global retailing trend. Instead of expecting consumers at their new global locations to just accept a foreign brand, merchandise, and retail practices as-is, these newest global flagship stores have actually shifted the company's brand image in order to better fit into their new host environment. The brand image changes are sometimes small, sometimes large, but never insignificant, as brand valuation goes.
The Starbucks New Delihi flagship store and the Starbucks flagship store in Ho Chi Minh, Vietnam have both opened in the past month and have both embraced local style and culture in a big way. In fact, they have abandoned their traditional American coffee shop chic so much that you would hardly know you were in a Starbucks at all, if it weren't for the iconic Starbucks siren logo. Tommy Hilfiger's flagship store in Los Angeles still embraces the Hilfiger branded navy blue and antique brass, but also acknowledges the culture of its location in a very visible way with a "red carpet" men's collection and an area dedicated to vintage celebrity items like Marilyn Monroe's cowboy boots and a Hilfigure sweater once owned (and worn?) by Michael Jackson. Sephora's acknowledgement of China's culture is a little less visual, but no less significant. In the new Sephora Shanghai flagship store, the merchandise mix includes 17 Asian brands, three of which are brands from Chinese manufacturers.
These global retailing shifts may not seem like big news, because haven't retail companies always made changes to their offerings and brands when moving into a new country? The answer is "yes" for the retail chains that have successfully endured outside of their home country borders, and "no" for the retail companies that were arrogant enough to believe that just because they were popular with consumers in their home country that the whole rest of the world should love them just the same.
Take McDonald's (MCD) for example, which has been in the Australian market for about 40 years. On its Australian menu right now, McDonald's sells a range of "Aussie Classics" including a Bakehouse Brekkie Roll, a Rosti Brekkie Wrap, Passionfruit McFloat, Passion Fruit Frozen Fantz, a Passionfruit Pav Frozen Dessert, Flaky Fish Fingers, BBQ Lambburger, and a McOz Burger (with beetroot). These Aussie additions are not only a convenient way to use readily available local ingredients, they're also a spinoff of traditional Aussie culinary classics.
Apparently McDonald's has realized that blowing into any international town with a kitchen full of all-American fare might not be the best or most sustainable long-term international strategy, and that's a good start. But the kicker for McDonald's Australia, and the way that McDonald's finally successfully integrated into Aussie culture was by referring to itself as "Macca's" in its advertising and even in its signage
According to my Aussie friends, consumers have been referring to the McDonald's brand as "Macca's" for years. To be precisely correct, the nickname is "Mac-ers," but with an Aussie accent that morphs into "Macca's."
So McDonald's officially became "Macca's" - golden arches signage and all - on January 26th in honor of Australia Day at 13 of its Australian locations. It's hard to recall a bigger brand image shift that's been made in an effort to embrace an international culture by any big American brand than that. McDonald's says the renaming is temporary, and that it will change back this month, but I think Aussies are not going to let that happen without a fight. Once you go Macca you might never be able to go Back-a.
Compare that to Starbucks in Australia, which closed nearly half of the 146 Aussie locations that it had open back in 2008 and now has fewer than two dozen Australian outlets. When asked about that, my Aussie friends said that only tourists drink Starbucks coffee. And when asked why that was was the case, they said "Because Aussies drink coffee, not piss." I'm just the messenger of that message from Down Under.
So it doesn't really matter if Starbucks thought it had the best beans, the best roasts, the best blends, and the best brewing processes in the world when it blew into the Land of Oz back in the year 2000. What matters is that Starbucks didn't know or care what Aussies liked and they greatly underestimated Aussie loyalty to their own national brands, businesses, tastes, and cultural mores. Unlike the Starbucks stores that have just opened in Shanghai and Vietnam, there was no locally sources Aussie decor, no special menu items, and no acknowledgement that Australian culture was different from American culture at all. Instead there was the assumption that a delivery of American Starbucks-in-a-box would be seen as a great gift to the consumers of Australia. Not so, and the Starbucks brand may be damaged beyond repair in the minds of Aussie coffee drinkers for at least a generation.
For the most part, there have been very few retail chains that have changed their brand in significant ways when moving into international locations by design and from the beginning until recently. Now it seems to be global flagship SOP, which will probably prove to be advantageous to both the retail brand image and to the retail bottom line for the companies that are willing to leave their brand arrogance at home.
But most importantly, it will most likely prove to be a sustainable strategy. Because as demonstrated by Mattel's Barbie flagship store that opened in Shanghai in 2009 and closed just two years later, the novelty of new eventually wears off for every glitzy, flashy, larger-than-life global flagship store. Only the retail relationship endures. And for that to happen, there has to be a relationship established in the first place.