USA: Special Report - Branded in America

Establishing a foreign brand in the US is not easy, but good execution and presentation go a long way to securing a position.

by Helen Dunne, World Business
Last Updated: 23 Jul 2013

It was the introduction of three shiny escalators at Brooks Brothers' flagship store on Madison Avenue that, for some, signalled the downward slide of Marks & Spencer's American dream. Then the UK's premier high-street brand, M&S had acquired Brooks Brothers for $750 million a year earlier and spent $7 million refitting the mahogany-panelled store, in which Abraham Lincoln was fitted for the frock coat that he was wearing when he was assassinated. The escalators were just part of the revamp: M&S opened up glass display cases, changed the store's layout and launched a glossy advertising campaign, eschewing Brooks Brothers' traditional pencil drawings on the second page of the New York Times.

The changes made front-page news in America, but they also alienated the store's traditional customer base, which once included Theodore Roosevelt and F Scott Fitzgerald. One Connecticut-based investment banker reportedly bought 200 shirts - a lifetime's supply - after observing the initial changes and fearing for the store's future. He would have been shocked at the later introduction of double-breasted jackets and trousers with pleats at a store once regarded as the bastion of the lounge suit. Newspaper articles regularly quoted anonymous employees questioning the new owner's strategy. After all, Brooks Brothers was the emporium where management once fretted for months about increasing the width of trouser leg from 16 inches to 17.

M&S' American adventure ended in tears when in 2001 it sold Brooks Brothers to Retail Brand Alliance for $225 million. Branding experts believe the outcome was inevitable. They argue that M&S failed to understand just what Brooks Brothers stood for and to recognise that its understated, unchanging way of doing business was exactly what appealed to its loyal customer base. "It was an iconic store," explains Matt Egan, senior partner at New York-based branding consultancy G2. "Marks & Spencer relaxed the traditions, but forgot what the traditional consumer expected from Brooks Brothers. Also, Americans have a hard time understanding the M&S brand - clothes and food under one roof, huh?"

But M&S is not alone in its transatlantic experience. There are many examples of UK-based retailers entering the US market and getting it wrong. Fashion chain Laura Ashley, electrical retailer Dixons and supermarket chain J Sainsbury have all misread the American consumer. Analysts claim they either expanded too quickly or failed to do adequate research before entering the marketplace; for instance, Laura Ashley appeared ignorant of the variations in regional temperatures across the country and found itself stocking winter clothes in warm-weather locations.

Even Body Shop, the eco-friendly beauty chain that now has a successful franchise scheme in the US, struggled initially. "US consumers found mixing political issues and campaigning with body products off-putting," explains Allan Biggar, founder of London-based consultancy All About Brands. "We bought it in the UK, but it didn't play out quite so well in America. Body Shop worked in the US only once it started to define its products and explain why consumers should buy them."

Charles Smallbone, founder of bespoke kitchen company Smallbone of Devizes, believes the US consumer is sophisticated in a way overseas companies can underestimate. "There is an arrogance from a number of British companies, which is: 'We've been successful in the UK, we'll be successful in the US', but there is no substitute for doing the groundwork. The Americans created the disposable society. The consumers are sophisticated; they know what they want and understand quality. They can see that things can be expensive and yet good value, and understand the differential between those two elements. And the consumers are also prepared to go the extra mile for good service."

His experience has been that American consumers are willing to pay more for the bespoke service his company provides, and understand the costs and timing involved in shipping products from the UK. Similarly, many other overseas companies associated with luxury goods have established significant niches in the American market. "With any brand, the company must decide the foundations, assets and characteristics that it is just not willing to change," explains G2's Egan. "Then they should consider what is open for interpretation and can be altered to make the brand translate better. A brand can have many layers, which creates a working model that can change for different market sectors."

Egan believes smaller, luxury brands are ideally suited for such an approach: "It is translation, not transcreation." LVMH, the Paris-based luxury goods company, redefined its brand within America when it ceased licensing agreements with multiple outlets and carefully controlled the distribution of its products to a handful of top department stores. "The point of any brand, ultimately, is to have a cultural relevance. That is easier to achieve with a smaller brand, which can be creative with distribution and selectively target markets."

Egan cites home spa and skincare retail chain Molton Brown as one of the best examples of an overseas company controlling its brand. "Before Molton Brown was introduced into America, the only contact it had with US consumers was as part of the kit that British Airways distributed in business class. It still has that exclusive cachet."

Norway's Voss Water established itself as a premium brand by distributing its minimalist bottles initially only to expensive restaurants. It has recently appeared on supermarket shelves. Similarly, Jaguar has made the transformation from associations with the green jacket and tweed brigade into a sexy, aspirational brand within America, and fashion group Burberry has never struggled with a US 'chav' issue, as in the UK, but is instead seen as an exclusive, high-end label.

"The mistake a lot of international companies make regarding America is the same one that Americans make when they come to Europe. They think it is all one place," says Biggar. "But the diversity and cultural differences between East Coast and West Coast, let alone Middle America, are huge and it is critical to understand these. The ethnic and language issues alone mean that a brand with a single positioning is very difficult to do. There is a huge difference in attitudes between the East Coast and southern US; they have a very different set of values. Then there is the Sino-California area of southern California, where they are really looking towards Asia for their inspiration."

As anybody who has ever watched an American version of a UK comedy will understand, humour does not always translate well. Similarly, the language barrier can be difficult even for other English-speaking countries. "The UK can be a hostile and cynical market, whereas in the US consumer brands are trusted. Subtlety doesn't go down very well in America," says Biggar.

The US is behind other countries when it comes to ethical issues and corporate social responsibility. Although many international companies are building and enhancing their brands through 'green' credentials, it is an asset that US consumers have yet to appreciate. Energy giant BP, for example, which promotes itself across Europe as 'Beyond Petroleum', has a more aggressive message within the US. When supermarket giant Wal-Mart announced plans to cut greenhouse emissions, it did not alter the perception of the company in the eyes of its customers, who are primarily concerned with how much they have to pay for goods.

"The marketplace is hugely competitive and the Wal-Mart effect is prevalent," concedes Egan. "The truth is also that the vast majority of US consumers are, perhaps, less culturally aware and less exposed to things from elsewhere. Sixty per cent of consumers do their shopping in one store and all that matters is price, price, price. It needs to be a very strong brand to persuade them to buy something that costs, say, $4 more."

Not surprisingly, US consumers react well to US brands and many foreign companies have done well in the marketplace because their origins have become hazy. This has been important in markets where American firms dominate and where consumers worry about foreign workers taking local jobs. Sportswear company Adidas has managed to shake off its German birth and is viewed as a home-grown company, while Japanese car manufacturer Toyota has successfully managed to alter perceptions by regularly highlighting its Kentucky factories. "People know they are Japanese cars, but they are seen as American too," says Egan.

"My advice to anybody considering launching a new brand in America is terribly boring," says Biggar. "It is not to try to think that they can take a shortcut to enter a market. It is a complex market. Every good brand has a strong central, core message, but it is the execution and the way in which it is presented that will establish its position."

But it is not just foreign companies entering the US that get it wrong. When GM's Chevrolet division launched its popular Nova model in Latin America, it failed to appreciate that, in Argentina, no va means 'no go'.

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