Surprises For International Retailers Coming to the USA
We are all aware that stateside landlords long for that new, fresh idea—something they can show off at their mall or street location and that can’t be found in every mall in every city in the country. Successful international retailers are aware of this potentially lucrative avenue to increase revenues. USA demographics are incredibly enticing. Some international brands translate well; upscale malls and high streets would suffer tremendous vacancies without contributions from European luxury retailers. Unfortunately, however, it’s not always clear sailing. Some brands don’t translate well, be it style, sizing or color. And frequently, international retailers encounter operational requirements which differ drastically from their home turf.
London-based retailers can comfortably anticipate that if their construction drawings satisfy the national building code, they can secure a building permit for new stores in Birmingham, Liverpool, Manchester and elsewhere throughout the country. So, the notion that one building inspector in a small town in New Jersey can hold up construction of a store in a major regional mall is confounding and confusing to those retailers. And, they were expecting unfettered USA capitalism and the loosening of regulations! On the flipside, the sale seasons in Spain and Germany are limited and strictly regulated. It isn’t easy to pivot to an American environment of perpetual discounting.
Another cultural and legal difference relates to the negotiation of leases. European retailers are not accustomed to the wide-open negotiation of almost every term and condition of a lease. In Europe, a good number of lease provisions are governed by statute or common law. This provides for shorter—and cheaper—lease negotiations. Typical tenant protections in Europe are time-consuming and costly to obtain from tough USA landlords. Imagine—as in the UK—that there is a legal presumption that a tenant has a right to renew its lease, irrespective of the terms of the original document.
Perhaps the most difficult adjustment is the necessity to understand and comply with widely-varying state regulations and laws. A major international retailer entering the USA market will need guidance on credit card laws, advertising, labor standards, discounting disclosure requirements and other operational concerns which differ state to state. You are legally prohibited from requesting zip codes from customers in Massachusetts, for example. Is that privacy protection the same in New Jersey or Montana? Do you need to disclose that an item being sold in your outlet store was manufactured exclusively for outlets?
Alexis de Tocqueville famously stated that “there is hardly a political question in the United States which does not sooner or later turn into a judicial one.” Little did he know that his comment would ultimately apply to retail as well.