te. “We’re a very late developer in that space, and we were playing quite a bit of rapid catch-up,” Sweeney said in addressing attendees at the Online Retailer event in Sydney last week. The rapid growth global growth that Cotton On Group has enjoyed since 2007 – and in particular since 2012 – has been in no small part due to increasing focus on online initiatives. In the last 18 months alone the group has built and launched seven websites in seven countries. “This global market is exciting,” Sweeney said. “The latest estimates I’ve seen is online e-commerce is worth US$2.5 trillion, so it’s a pretty big market. It’s an enormous market, so everybody gets excited about it, and everybody wants a slice of it.” Sweeney said this has led to a whole continuum of different approaches from retailers in striving to leverage online for business success. The two main routes taken are investing sizeable sums into consulting agencies to devise a desktop and research-driven strategy, which is typically favoured by large corporate organisations. The other, less analytical, option is to just dive in with both feet. “The reality of the early days of Cotton On’s expansion is it was much more like just dive in,” Sweeney said. “The first international market Cotton On went to was Singapore – not because of any finely researched strategy. Somebody from Singapore rang reception asking if they could license the Cotton On brands. And the founder had never even been to Singapore, so he thought he’d go and have a look. He literally went to Singapore, was blown away by the quality of retail, and thought, ‘Why don’t we just have a crack and open one store ourselves?’. And that’s how the whole story started.” Such off the cuff international expansion hasn’t harmed Cotton On. The group now boasts over 50 stores in Singapore and over 50 in the southeast Asia region, and Sweeney revealed that around half of the privately owned retail group’s annual turnover is now generated from outside of Australia and New Zealand. Eyes wide open While not discounting the virtues of the well-researched, strategic tack, nor strictly endorsing the ‘dive in’ approach, to setting up a retail business for international success, Sweeney recommends taking what he calls the ‘eyes wide open’ approach. “It’s really about not necessarily spending your life doing lots of desktop research, but actually thinking about the stuff that really matters that can actually determine whether or not you can be successful – and particularly whether or not you can be profitable in some of those markets. Brendan Sweeney, group GM, e-commerce at Cotton On Group “It’s really easy to run around the world planting a flag in every country – the big question is whether or not you’re building a sustainable, profitable business.” To do so, Sweeney believes the most critical thing retailers need to have under their belt is a sound understanding of the competitor landscape in the territory they are considering launching into. “And I don’t just mean your traditional competitors that you think about at home, so if the customer is not buying that product from you, who else are they buying it from? And why?,” he said. “And frankly it’s just as important to understand the competitors that have tried and failed as it is to understand the ones who have been successful. Because there are lots and lots of lessons from failed international expansion that can help you avoid trouble. It’s well worth understanding some of those.” One such example of a failed international expansion that retailers can learn from is British pureplay fashion retailer, Asos, entering China, and then leaving four years later with its tail between its legs and burning through what Sweeney estimates to be $50 million in, “going in, setting up, spending more money than they thought, losing money all the way through it, and then writing it all off on the way out”. “It’s a $2 billion turnover business,” he said of Asos. “$50 million is a pretty big bet; they went in and for a whole host of reasons, it didn’t work. “It’s really, really important to learn from others, and I don’t just mean from other retailers. Other retailers are generally quite open and willing to share their experiences. But I find it very helpful to leverage the technology network and the supply chain network and the marketing agencies. There’s just tons of people out that that, when you get talking to them, they can help you figure out what’s actually going on and what’s working and what’s not working. So that’s really important.” Commercial realities Above all, Sweeney argues that building a commercial model – with legitimate and realistically achievable goals at its core – is the one thing that local retailers need to get right if they wish to thrive outside of Australia’s borders. “Build a commercial model that’s got the right things in there,” he advises. “It’s super easy take a set of assumptions from your home market, overlay those in a new market, and get it badly wrong. “I think that quite often people miss some of the really obvious things. One of the most important things is – is there actually a demand for your brand in that marketplace? We know our brands are successful in our own markets, so we tend to fall into a trap of assuming that just because people in the countries that we’re in like it, the whole world is going to like it. “So look hard at are you getting overseas traffic to your websites. The reason it is important is customer acquisition costs can vary massively by marketplace. Even if you compare paid search terms in the apparel industry between Australia and the US, it can be 50 to 100 per cent more expensive for the same search terms in the US. So it can make a material difference.”