shopping destinations

February 11, 2019 •

3 min reading

Shopping Destinations: Mixing Local and Foreign Brands

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Many destinations around the world, be it Singapore or Hong Kong in Asia or London and Milan in Europe, promote themselves as shopping ‘paradises’ to attract tourists and this marketing strategy has become an important economic driver globally.

Although the global economic impact of shopping is difficult, if not impossible, to gauge due to the difficulties in tracking every single transaction and differentiating between locals, domestic tourists and international tourists, some major cities have mobilized local tourism bureaus, retailers, and major credit card companies to estimate the size of the shopping sector. For example, New York City’s shopping/retail market is estimated to be around USD$8 billion and London’s is worth USD$9.8 billion. Beyond its ability to generate income from sales, the retail industry also has an indirect financial impact on real estate value, incomes, and the creation of jobs.

What about sustainability?

One important question for many is how to develop a sustainable shopping industry for a destination or country. One possible solution is to develop a healthy mix of local and international (i.e., foreign) brands in the market. For any nation to benefit truly from the growth of the retail sector, the resulting sales must have a substantial portion of local brands.

If a destination cultivates its shopping industry solely with well-known foreign brands, it risks adopting the role of an original equipment manufacturer (OEM) or original design manufacturer (ODM) and forgoes the opportunity to become an original brand manufacturer (OBM).

In other words, if a destination’s retail sector relies too heavily on sales of foreign brands, it will not benefit from any brand equity, which is arguably the most valuable and sustainable asset for businesses.

Many destinations and their governments recognize the importance of developing local brands for the shopping industry and favor development that supports both local and foreign retail brands.

For example, in Bangkok, Thailand, the Siam shopping district has two complexes in close proximity, Siam Paragon and Siam Square One, which feature international brands and local brands, respectively.

Likewise in Hong Kong, The Langham Place shopping complex features both international and local brands on separate floors. Larger international brands bring in the traffic that can benefit independent local brands.

The emotional attachment with local brands

Less is known with respect to how shoppers experience local and foreign international brands. In a recent study using data collected from shoppers at a local and foreign brand department store in China, we sought to gain a better understanding of how consumers experience shopping and whether it was affected by local versus foreign contexts. As is evident from the study’s findings, consumers seek greater emotional attachment with local brands than with their foreign counterparts.

This has important implications as many local brands, especially those in developing economies, often invest a great deal of time and resources in copying the management and operational practices of foreign companies. As a result, blindly following what larger international companies are doing may not yield the intended outcomes.

Leverage authenticity and focus on emotions

Perhaps it is more effective for local brands and companies to stay true to their core values and invest in training and developing employees, as well as constructing ‘servicescapes’ (e.g., shopping facilities) which cater to the emotional bonds expected by consumers.

For example, local department stores may want to emphasize the local aspects of their goods in the manufacture, design, and branding of the different products they carry.

They may also want to invest time and money in promoting local designers and brands to their shoppers. In addition, these local designers and brands may develop narratives using cultural and societal connections that are familiar to local shoppers.

In terms of training employees, many developing economies adopt a systematic and scripted approach to how employees should interact with customers, an approach used by well-established international brands. But the current study suggests that shoppers at local department stores might prefer more causal and warm interaction with frontline employees. Again, local department store employees should leverage their local knowledge and experience to engage customers in conversation close to the customers’ home and heart.

For more on this study, ‘The Moderating Role of Local vs. Foreign Shopping Context in Consumer Experience’ in the Journal of Global Marketing: Vol 31, No 5.

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Written by

Former Assistant Professor of Marketing at EHL.