When market entry loses its sizzle

So, the UK papers this weekend (26 and 27 May) were all in agreement that Australian company Wesfarmers’ acquisition of Homebase has been nothing short of a disaster where not even its famous “sausage sizzle” barbecue fundraisers were enough to attract the UK shoppers and cement a successful acquisition.

When your market entry is described as an “ignominious defeat” (Daniel Thomas, FT) or an “eye-wateringly painful lesson” (Alex Ralph, The Times), then you can be sure that you have got things monumentally wrong.  Although most journalists acknowledged that the initial deal might have been ill-timed and at an inflated price it is the “marred by poor execution” comment that most interest us.

And it seems it comes down to one of the most obvious issues – failing to understand the local market, something that applies to any brand, large or small, in any sector.  It seems that Bunnings assumed that what worked in Australia would work here in the UK but they seriously misjudged the British DIYer and the Homebase shopper who was used to more soft furnishings and garden ornaments than serious barbeques (anyone noticed our weather here?) and heavy lifting equipment.

Some have described this as “arrogance” on the part of the Australian management team (the British leadership team were pretty much replaced) and point out that retail can be a very local business.  It’s certainly true, the majority of our retail clients are specialist, one-off boutiques or retail outlets who discover that one London street can be very different from its neighbour.

So, if you are an international brand and want to avoid what Richard Lim of analysts Retail Economics describes as a “disaster…woeful decisions, clumsy execution and a misjudged perception of the UK market” then make sure you invest in local knowledge and intelligence.  It may just save you from an expensive mistake.