Staking a Claim in the U.K. Market

Too often something goes wrong when Americans attempt to set up shop in the United Kingdom. Just read the recent article “London Not Calling,” a chilling report on the demise of TheStreet.com’s and eToys’ operations in the U.K., the thud heard around the international business world.

After delving last time into the tricky realm of expanding email marketing campaigns in the European Union, we now are going to take a look at two dynamic U.K. entrepreneurs, one who sells classic neckties and one who develops technology platforms. They have some stern but invaluable advice about what not to do when expanding one’s business in the U.K. market.

Tread Carefully on Local Ground

Do you (or does your husband) suffer frequent bad-tie days? Ever wonder if opting for a higher-end product might bring these days to an end? These are questions that small-business co-owner Martin Brighty hopes more people will ask themselves. Brighty is founder of Hunters, a luxury tie maker that occupies the proud position of tie maker of Savile Row, the famous hub for gentlemen’s tailoring. His customers include Barneys, Burberrys, and Paul Stuart, just to name a few.

But beyond ties, Brighty has also become a kind of authority on all the things Americans do wrong when entering the U.K. market.

“Differentiate your product or die,” Brighty warned. “To us, TheStreet.com and eToys looked like big advertising expenditures, but they didn’t take the time to localize. Could eToys deliver within 48 hours to European locations? That was questionable. But Amazon could because they had a European presence — at least in our minds they did.”

Plus, Brighty added, “People in the U.K. tend to trust things more when there is a local point of contact.”

Avoid Common Pitfalls

If tying a bow tie causes fear in otherwise brave men, then what about automating one’s business services? Welcome Philip Cooper, cofounder and director of investor and external relations for Kprime Ltd., a Europe-based globally focused technology company that develops “expert marketplace” platforms that help automate the sourcing and procurement of business services.

Prior to cofounding Kprime, Cooper spent five years with Morgan Stanley Dean Witter & Co. in London. He compares Morgan’s first European entry strategy in the early ’90s with that of TheStreet.com and eToys.

“They did many things wrong,” said Cooper. “It took them a couple of years to revise their strategy to get it right and become successful. However long you think it will take to become successful in the U.K., it will take longer.

“A mistake that both Brits and Americans commonly make is to assume that because we all speak the same language, we are very similar. There are lots in common, but there are significant language and cultural differences on both sides. For example, five weeks’ vacation time a year is the norm in the U.K., as it is across Europe.”

He added, “Don’t make the mistake of viewing Europe like America — one big single market. Although the European Union and the single currency is moving Europe towards a federal structure, it’s still a group of independent nation states with their own rules, regulations, and culture.”

It would be wise to study companies that finally became successful in the U.K., such as Morgan Stanley, Microsoft, and Oracle. Cooper suggested that a significant factor in these companies’ success was that they adjusted their business assumptions about Europe and the U.K. and also developed a “strong local presence and became known as a major international player.”

Where eToys and TheStreet.com Stumbled

1. They were not the first movers in their sectors. For example, Amazon.com was the first real dot-com experience for buying books online for people in the U.K. So the market was wide open. Brits were also aware of Amazon.com’s wild success in America. “Part of the fun in purchasing was to say you had bought something from Amazon,” Brighty said.
2. The companies did not differentiate their products or services. Brits could get toys and financial data anywhere. Why, then, go to an outsider? What’s different and special about these companies?
3. Cultural factors were overlooked. The British enjoy the wider experience of shopping for toys — they want more than to just purchase them and be done with it. “Half the fun is going to the toy store with the children — the parents, uncles, aunts, and grandparents, who enjoy it as do the kids,” said Brighty. “In the case of TheStreet.com, they didn’t realize the huge following The Financial Times had in the U.K. and how people wouldn’t bother with TheStreet.com.”
4. These companies did not understand their own value propositions in an international context or make a case for them. “You not only have to understand your value proposition, you have to clearly differentiate it from others,” said Cooper.

The Six Commandments for U.K. Expansion

1. Do your homework and research the market beforehand.
2. Identify competitors, particularly the leaders, and study them carefully. Determine if you can compete with them or whether it may be better to join forces to dominate the market.
3. Learn the local culture — what defines it and gives it its unique flavor. At least learn the most fundamental social norms and basic idiom of communication. In building an optimal trade relationship in the U.K., your goal should be no less than to enter that market and make it your own.
4. Dispense with the happy (na&iumlve) thought that the Brits are ready to surrender their patterns of recreation and purchasing habits for something unfamiliar.
5. Rethink your promotional efforts. Deep financial pockets can’t hurt, of course, but real promotion in the U.K. moves well by word of mouth. So get to know people. In the U.K. a good favor begets good favors. The more you reach out to the market with a good turn, the higher the ceiling.
6. Work with locals who have a native feel of the U.K. and an understanding of American business. American university alumni lists might help you locate U.K.-born business-savvy scouts.

Next time, we’ll put together a plan that will direct all of the above advice toward an effective email marketing campaign.