By Maurice Marchand-Tonel | Chairman | EACC Paris
If you already do business in Europe and successfully so, do skip this vignette. If you are in a B to B space, just skim through this. If, however, you are in a B to C business with a goal of conquering Europe with your unique products that your US consumers love so much, let’s just throw in a couple basic remarks.
IF you are in a B to C business with a goal of conquering Europe with your unique products that your US consumers love so much, please allow me to give you some free advice. The European Union, particularly Western Europe, is the world’s second highest concentration of wealthy consumers, and the EU is clearly a success as a free trade area (political union is another story). In B to B businesses, it does begin to look like one big US-type market. If you are say Caterpillar selling to construction companies, potential buyers will listen to you, whether they are in Barcelona or Vilnius. But if you have to conquer the hearts and pocket books of end consumers, please consider Europe as a farrago of distinct markets that you have to consider individually before you think Europe-wide. Long memories and old cultures cast long shadows and European consumers are often fiercely draped in wildly different tastes and thinking patterns.
Let’s look at the evidence. Wal-Mart enjoys a satisfactory presence in the UK following its acquisition of Scotland’s Asda, but it failed miserably in Germany. Kohler of Wisconsin, proud of its Austrian heritage, thought it had acquired a European brand when it bought bathroom equipment manufacturer and marketer Jacob Delafon, but it quickly found out that this honorable French brand would remain just that, a French brand in France, with no sale beyond the old pale.
The floor covering industry is a case in point. In this complex industry, you ideally want to forget old quirks and put together a rational unified product line serving all of Europe. This will provide your plants (be they resilient or textile products) with delectably long production runs and economies of scale. Well, just be prepared for a tough slog. If you think white is white, the Swedes will prove you wrong and will demand twenty different shades (if you don’t see the differences, they will). The Dutch will drive you crazy with their insatiable appetite for ever more different shades of grey. An Italian red is starkly different from a British red (not to mention the metric vs imperial differences in the physical product) and of course the “kitchen carpet” is a purely English institution, yukky though the Continentals may find it. Only the French will be enamored with needlefelt products (which the English find yukky) and if you find yourself standing on linoleum, you know you’re in Scandinavia.
If you have a strong distribution, cost-competitive products and an awesome Europe-wide sales force, you do eventually succeed in having a much shorter product offering that will initially meet 80% of market “needs” and progressively 95% as you pass off in price decreases some of the savings you generate back at the plant. But you’d better have time and a robust multicultural tribe across marketing, sales, product development, production and support functions. Only one European company achieved this, other Europeans remained local and, in spite of several attempts, no American company ever dented the European market seriously. (To be fair, the Europeans also had a tough time penetrating the US market, and only succeeded in specific niches. Dalton, GA remains the world-wide capital of good old super-heavy tufted carpets, weighing ten times more than same-purpose European products).
The DIY retailing industry also offers a dramatic example. The leader in the UK, Kingfisher, has owned the Number Two guy in France, Castorama, for over twenty years. Frantic exertions have been deployed to rationalize product lines (and increase purchasing clout) between the two companies. A recent count showed that, out of a grand total of 393,000 stock keeping units, the ones common to the UK and France after much effort were a whopping …2%.
With that said, entry barriers into Europe are a fact of life, but they’re not insurmountable. The payoff can be huge, and success with European consumers is not only for the Coca Colas of this world. Many initially small companies, from Wrigley’s to Mars, to Jack Daniel’s or Calvin Klein have succeeded in winning over European consumers. The only iron rule is that you have to start somewhere locally, with unbiased people who understand you and whom you can trust. This is what EACC is all about.