Retailers right at home in overseas markets

Along with a better-than-expected fourth quarter this year, domestic retail businesses that have entered overseas markets are seeing steady sales growth, the Korea Chamber of Commerce and Industry (KCCI)?said yesterday.?

According to a KCCI survey on?the business status of?foreign subsidiaries of 62 domestic retailers, sales are expected to increase 39.6 percent this year compared to 2012.

Overseas sales have been increasing since the KCCI started the survey in 2010. They were up 17.2 percent in 2010, 24.2 percent in 2011, 32.7 percent in 2012 and nearly 40 percent this year.

Eight in 10 retail companies surveyed said they will expand overseas next year.

Regarding this year’s performance, 48.4 percent of companies forecast that they will be in the black next year, while 38.7 percent expect to break even and 12.9 percent be in the red.

As to why they expect to be profitable, 73.3 percent cited sales growth, 33.3 percent said the growing popularity of Korean products, 26.7 percent said having gained confidence in local markets, 26.7 percent chose strengthened marketing and promotions, and 23.3 percent said improved margins.

“As initial investment costs are high when expanding into overseas markets, due to establishing local infrastructure and strong promotional and marketing activities, it is difficult for the sales increase to lead to profits,” said a spokesman for the KCCI.

“For successful entry into foreign markets, companies should come up with a long-term management strategy, instead of short-term strategies that generate profit in a short period of time.”

Perspectives on the business environments of international markets varied depending on the size of the company.

In case of the midsize and small companies, 26.2 percent said the business environments of overseas markets have improved this year, compared to 11.9 percent that said they worsened. The majority (61.9 percent) said there has been no change.

For large companies, 30 percent said the situation has deteriorated, while 15 percent said it has improved and 55 percent saw no change.

“For the factors that lead to successful global market expansion, large companies cited localization most often and small and medium enterprises cited product differentiation,” said Kim Kyung-jong, director of the distribution and logistics agency at the KCCI.

“While large companies easily become subject to regulation in overseas markets as they often enter as large comprehensive retail businesses, SMEs that are entering with differentiated products and services in the cosmetics and franchise sectors are adapting faster.”

Meanwhile, the most popular countries for overseas expansion were China (80.6 percent), the United States (41.9 percent), Japan (30.6 percent), Vietnam (25.8 percent) and Indonesia (17.7 percent).

When asked about the most promising country in the future, China was cited by 53.2 percent, followed by Southeast Asia with 37.1 percent, Indonesia with 35.5 percent and Malaysia with 17.7 percent.

Reasons cited for viewing these markets as promising were their large market sizes (72.6 percent), growing preference for Korean products (53.2 percent), favorable market conditions (17.7 percent) and high economic growth, 16.1 percent.

BY KIM JUNG-YOON [kjy@joongang.co.kr]