Introduction
Most people who visit foreign countries are likely to encounter familiar fashion brand stores that they have seen in their home country. Many global fashion brands are operating in many international markets, resulting in a significant proportion of their revenues being generated outside their home markets. Twenty-four fashion-related groups or companies are included in the top 250 global retailers by retail sales (Table 1.1). The majority of global fashion brands operate beyond their home countries, and a significant number of those brands earn more than half of their revenue from international operations. For example, revenues from international operations are 95 % for H&M, 80 % for Inditex, S.A., and 68 % for Nike. Three leading luxury fashion groups—LVMH, Prada Group and Kering, S.A.—made 88 %, 84 % and 68 %, respectively, of their retail sales outside their home country. In addition, they are active in operating in many countries. Prada Group markets in 90 different countries, and LVMH has a presence in 76 different countries.
Table 1.1
International revenues and number of countries entered, selected global fashion retailers
Retail sales ranking in top 250 global retailers | Company name | Company origin | Retail revenue in 2014 US$M | International revenue in 2014/% of international revenue in total retail revenue | Number of countries entered |
|---|---|---|---|---|---|
41 | LVMH | France | $36,039.2 | $31,775.7 (88.2 %) | 76 |
44 | Inditex S.A. | Spain | $23,717 | $18,864.5 (79.5 %) | 89 |
49 | H & M Hennes & Mauritz AB | Sweden | $21,935 | $20,873.3 (95.2 %) | 54 |
60 | Marks and Spencer Group | UK | $16,625.3 | n/a | 48 |
61 | The Gap Inc. | USA | $16,228 | $3556 (21.9 %) | 54 |
76 | Fast Retailing Co. Inc. | Japan | $13,605.5 | $5059.5 (37.2 %) | 30 |
93 | L Brands Inc. | USA | $11,454 | $1349 (11.8 %) | 58 |
109 | C&A Europe | Belgium/Germany | $9733 | n/a | 21 |
n/a | |||||
143 | Kering S.A. | France | $13,323.4 | $9139.2 (68.6 %) | 90 |
144 | Associated British Foods plc/Primark | UK | $6673 | n/a | 8 |
147 | Foot Locker Inc. | USA | $7151 | $2175 (43.7 %) | 30 |
162 | Belle International Holdings Ltd. | HK | $6465.1 | $58.2 (0.9 %) | 3 |
163 | Nextplc. | UK | $6552.9 | $576.4 (8.8 %) | 74 |
170 | Nike, Inc. | USA | $30,601 | $16,861 (68.3 %) | 49 |
180 | Shimamura Co. Inc. | Japan | $6015.2a | $45.8 (0.8 %)a | 3 |
186 | E. Land World Ltd. | S. Korea | n/a | n/a | 15 |
190 | Ascena Retail Group Inc. | USA | n/a | n/a | 3 |
209 | Coach, Inc. | USA | $4191.6 | $1724.1 (69.9 %) | 17 |
219 | Abercrombie & Fitch Co. | USA | $3744 | $1335.6 (39.7 %) | 22 |
224 | Forever 21, Inc. | USA | $4000 | n/a | 39 |
225 | PRADA Group | Italy | $4599.6 | $3875.1 (84.2 %) | 42 |
228 | Groupe Vivarte | France | $884.7 | n/a | 64 |
244 | Tiffany & Co. | USA | $4249.9 | $2216.4 (50.5 %) | 25 |
245 | Ralph Lauren Corporation | USA | $7620 | $2543 (33.4 %) | 47 |
The fashion industry is one of the most actively internationalizing sectors in retailing. One of the reasons may be that, compared to other sectors such as food and home improvements, fashion requires small-scale retail space, entailing little financial investment and low management set-up costs, so that economies of replication can be maximized in the international market (Dawson, 1993).
International activity by fashion brands is not a new phenomenon. High-end fashion brands began to internationalize early on. Hermès, for instance, started to sell their saddles to elite clients worldwide in 1880, and Burberry opened their first store in Paris in 1909. Later, mass-market brands such as Levi’s and Nike as well as fast-fashion brands such as H&M started internationalization: H&M first entered international markets in 1964, Levi Strauss in 1965, Nike in 1972, Ralph Lauren in 1981, Gap in 1987 and Zara in 1988. Internationalization by fashion brand retailers has, however, reached unprecedented levels over the past two decades, with fast-fashion retailers in particular showing phenomenal rates of internationalization. Zara is currently operating in 881 countries and H&M in 59 countries.2
The internationalization activities of fashion brands are significant for society. They contribute not only to the growth of individual businesses but also to employment and economic growth. With multiple retail stores in almost every country where they operate, fashion brands create jobs for host countries and transfer aspects of their business model such as retail format, operational techniques, and consumer values and expectations to the host country (Dawson, 2007). Most fashion brands are small and medium-sized enterprises (SMEs) employing less than 300 people. In Italy, a leader in the internationalization of global fashion brands, only 0.12 % of firms that produce clothing and shoes employ more than 250 people (CensStat, 2015). Many well-known Italian global fashion brands, such as Benetton, Stefanel, Miss Sixty, Geox, Diesel and Max Mara, were relatively small when they first began to expand internationally.
This chapter focuses on the internationalization of fashion brands from the retailer’s perspective. A fashion brand can be a manufacturer’s brand or a retailer’s brand or both. North Face, for example, is a manufacturer that sells to retailers even though it also sells directly to consumers. J. Crew is a retail brand; they develop, produce and retail. Gap, Inc. operates in about 40 countries and sells apparel products to consumers in more than 90 countries worldwide through 3700 stores and e-commerce sites without owning any factories at all (Bhasin, 2014). Irrespective of their core function as either manufacturer or retailer, most fashion brands that go international pursue both production and retailing. However, the objectives are different for production and for retailing. Fashion brands seek low costs when manufacturing internationally (cost reduction) and larger markets when retailing internationally (firm growth) (Dawson & Mukoyama, 2006; Dawson, 2007). The highly labor-intensive nature of apparel production may lead apparel firms to outsource the manufacturing process globally (Gereffi, 1994). Moreover, international production or global sourcing has been liberalized since the abolition of the Multi Fiber Arrangement (MFA) in 2005, which completely eliminated restrictions on the quota developing countries were allowed to export to developed countries. On the other hand, managing brands in the global market requires more highly skilled marketing, innovation, distribution, service and investment than international production (Kumar & Steenkamp, 2013). Production and retailing business models are thus totally dissimilar, even for a vertically integrated company that is involved in both production and retailing, such as Zegna. Production and retailing internationalization activities cannot be adequately explained if the two are considered in combination. This chapter therefore focuses on the internationalization aspects of fashion brand retailing, and not on the internationalization of its production.
Retail internationalization has largely been explained using existing internationalization theories, which in turn were largely conceptualized from the perspective of large corporate manufacturing production (Dawson, 2007). Different reta...