Beware of maps – how geography betrays the big brands

0
Beware of maps - how geography betrays the big brands

Back around the turn of the century (no this century, not the 20th!) a favourite topic of the, then, MI Industry trade mag was ‘pan-European distribution – is this the future?’. I know because I was one of the journalists paid to ask industry pundits this question and report their views. 17 years later, I think we can now safely say that the correct answer was ‘not really’ – unless by ‘pan-European distribution’ someone had been telling Hans Thomann’s fortune – in which case they missed a useful career staring into a crystal ball on the end of Brighton pier. No one seemed to see him coming.

It is true that there are successful companies operating either Europe-wide or partially Europe-wide distribution models. PRS and Taylor both seem to be successful and in multi-brand distribution there are companies like EMD and GEWA, but what concerns me for this article are brand owners and the way their multi-national owners look at a map of the world – and sometimes infer all the wrong things from it.

Let me ask a leading question. Do retailer readers feel that some of the large suppliers they do business with function as well as they did before their owners moved them out of the UK and centralised them elsewhere, usually in Germany? You see, my impression is that it is fraught with problems that the CEO of a giant corporation, sitting in a boardroom in Tucson or Tokyo, too often fails to appreciate. To him, the map of ‘Yoorp’ seems quite simple. Germany is nicely positioned to serve markets from the former Soviet empire all the way west to Ireland, as well as up to the icy bits and down to where the lemons grow. It has a perpetually booming economy, a reputation for efficiency, an educated workforce and lots of other good things that appear to make it a natural choice to plonk your HQ, while, as far as possible wrapping-up the local operations or reducing them to a regional sales office on an agency basis, with all the handy tax advantages that can be devised.

Like all cunning plans, it might look great on paper but has it actually worked? I can think of several cases where I would suggest it hasn’t. Could it be that British retailers prefer to work in a British way, French retailers in theirs and Greek retailers (those that remain) ditto? Could it be that marketing strategies that look wonderful in Frankfurt appear less so in Fain-les-Montbard, Frimley or Faraklada? Could it be that the German market is so different (not least in terms of the affluence of its customer base) that policies decided there are simply not applicable elsewhere?

My impression is that with some exceptions, plonking giant American or Japanese brands in Germany will one day be seen as a mistake and that those brands can sometimes suffer considerably as a consequence. What’s more I could name at least half a dozen in our industry which seem to bear that out – brands which were once far more prominent in the UK market than they are today.

I hope it goes without saying that the point of this observation isn’t to bash the Germans. My argument is that people running major companies should be far more careful to understand local conditions when making strategic decisions. When the Japanese first began the strategy of buying up their previous European distributors they usually took care to maintain local connections, and they benefited from it – think of Yamaha with Kemble. Abandon that localisation and the risk, as BT found when it closed its local call centres and shifted them to India, is that what pleases the accountants and business school theorists, has a habit of damaging brands in ways it can take many years to recover from. And I would suggest that, in our industry, there are gaps on the shop floor and in the stock room that prove it.