Redesigning retail: Operating model

imperatives for international retailers

 Deploying the right operating model can
help international retailers drive profitable
growth by balancing customer relevance
and operational efficiency across diverse
and dynamic markets.
Today’s consumers are a formidable segments and industries are ramping
bunch. Armed with more information up their retail presence. For example,
than ever thanks to technology, they big-name manufacturers including
shop anytime, anywhere and with Apple, P&G and Nike are now
anyone they choose. Moreover, choice, bypassing traditional retailers and
convenience and service mean just reaching consumers directly through
as much to them as price. Evolving multiple channels.
customer demands are driving
retailers to tailor their offerings, Growing numbers of retailers are
expand into new business segments going international—and small
and enhance customer touch points. wonder. Home markets are saturated,
but markets near and far, particularly
At the same time, competition— in emerging economies, still offer
always fierce in retail—is intensifying. white space (see Figure 1). The world’s
Only the fittest or luckiest retailers largest retailers are entering more and
have survived the global downturn, more countries (see Figure 2).
and investors are demanding ever
better performance from them.
Already-lean retailers are searching
for new ways to achieve structural
and operational efficiencies in a bid
to outpace competitors. Furthermore,
new players from other retail

2
Figure 1. A billion new consumers1
Consumer spending in the G6 and B6 Top 15 conumer markets in 2025
(real US$ billions, at Purchasing Power Parity) (private consumption, US$ billions, at PPP)
B6 2009 G6 2009 2009 2025F CAGR
2030F 2030F China 2,934 13,324 9.9%
United States 9,235 12,332 1.8%
CAGR CAGR India 1,945 6,793 8.1%
6.4% 1.8% Japan 2,238 2,405 0.5%
Brazil 1,188 2,145 3.8%
Germany 1,508 2,058 2.0%
32,362 Russia 1,083 1,888 3.5%
Mexico 905 1,576 3.5%
France 1,136 1,544 1.9%
23,961
UK 1,272 1,474 0.9%
Indonesia 543 1,397 6.1%
16,345 Italy 956 1,256 1.7%
Iran 370 1,218 7.7%
South Korea 659 1,111 3.3%
8,714
Canada 702 1,000 2.2%

B6 economies G6 economies G6 16,345 21,068 1.6%

B6 8,714 26,837 7.3%
B6: “Big Six”—Brazil, China, India, Mexico, Russia and South Korea
G6: France, Germany, Italy, Japan, United Kingdom and United States World 39,467 63,427 3.0%
CAGR: Compound Annual Growth Rate

Figure 2. Internationalization of the world’s 100 largest retailers2

60 Number of world’s 100 largest

retailers with:
Presence in one country

50 Presence in two to four countries

Presence in five to nine countries

40 Presence in 10 to 19 countries

Presence in 20 or more countries

30

20

10

1Economist Intelligence Unit; Accenture Analysis.

0 2JA Dawson, “Scoping and conceptualizing

1986 1996 2004
retailer internationalization,” Journal of Economic
Geography, 2007, vol. 7, p.373-397;
Accenture analysis.

3
Yet entering emerging markets can
be challenging—and not just because
local players may enjoy structural or
legacy advantages in understanding
and servicing customers. Too often,
the worldwide “race for space” has
come at the expense of profitable
growth. That’s largely because many
retailers have failed to achieve
sufficient and sustainable levels of
customer relevance and operational
efficiency across multiple markets,
businesses, channels and brands.
The key to striking this balance is to
design the right operating model. This
is no small feat. One model does not
fit all—not least because different
retailers are at different stages of
internationalization (see Figure 3).
4
Nevertheless, when Accenture 1. Organize around your company’s
analyzed a representative sample of competitive essence—what you do
the world’s largest retailers, we found better than your rivals.
that leading companies are working
2. Recalibrate your international
to maximize synergies and efficiencies
operating model regularly as market
while delivering customer value—and
priorities evolve.
they’re outpacing their competitors.
Progressive international retailers 3. Leverage dynamic networks to en-
have sustained a steady focus on hance innovation, customer connec-
operational efficiency, a key lever for tion, agility and profitable growth.
achieving long-term high performance
(see Figure 4).
Moreover, our in-depth analysis,
which included more than 40 one-on-
one interviews with retail executives
and retail and operating model
experts worldwide, identified three
imperatives critical for designing
and deploying effective international
operating models:
Figure 3. Retailers at different stages of internationalization3
100%
Esprit
IKEA
H&M
Ermenegildo
Zegna
80%

Ahold Inditex
Metro Group
60%
Groupe Carrefour
Foreign sales/ Cencosud Auchan
Group
Total sales
Otto Group
40%
Staples
Tesco
Coach
Best Buy Casino Office Depot
Gap
20% Kesko Walmart
Starbucks
New Look Fast Retailing Coffee

The Home Depot

0%
Complexity of international footprint
(function of diversity of international markets)

Figure 4. Evolution of sampled international retailers’ economic performance4

14%

Average Return on Assets

12%
Average Return on Sales

10%

8%

6%

4%

2%

0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

3Company Annual Reports and Planet Retail

Annual Reports; Accenture analysis.

4Thomson Reuters; Accenture analysis.

5
Organize around your competitive essence
Use your competitive essence to
guide operational decisions
A retailer’s competitive essence lies
in what it does better than others
in its industry. For example, IKEA’s
competitive essence is rooted in the
Scandinavian home products retailer’s
ability to be a low-cost innovator,
procurer and manufacturer of well-
designed offerings for the masses.
People across the entire international
organization use IKEA’s competitive
essence to make operational choices
that support the company’s strategic
priorities and core value proposition.
To illustrate, designers source and
engineer products to achieve a desired
price point and to deliver stylish yet
affordable and functional products to
customers5.
Of course, internationalization
widens the array of operational
choices available to execute on your
competitive essence. Some companies
have tried to manage this complexity
by establishing guiding principles
about where and how capabilities
can be shared across geographies,
what should be outsourced or who
will make which decisions. Many
have also relied on a longstanding
practice to achieve global efficiency:
standardizing and centralizing back-
office operations while managing
customer-facing activities locally.
But today’s realities challenge such
simplistic rules.
Capture synergies across borders,
channels and business segments
Retailers now have access to
advanced technologies and analytics
that enable them to (for example)
manage online sales and marketing
virtually. What’s more, the rapid
6
development of emerging economies approach helps drive better on-shelf
has built new talent pools in diverse availability— a key component of this
locations, offering retailers fresh retailer’s competitive essence.
options for sourcing talent. But with
these options come challenges, such Reinforce your competitive
as complex decisions about where essence
a company will perform certain Walmart’s competitive essence
activities, who will perform them lies in its scale and a supply chain
and how those employees will be that enables it to deliver a diverse
managed. assortment of products to customers
at low prices. The company recently
Add to this the complexity of
reinforced this proposition by
operating across multiple channels
committing to cut supply-chain costs
and business segments with a
by 15 percent within five years, in
variety of brands and formats, and
part by shifting from third-party
you quickly see both the challenges
suppliers to direct purchasing for
and the opportunities of designing
private-label products and fresh foods.
operational synergies across these
The company has also established
dimensions. Competitive essence
four global merchandising centers for
becomes increasingly important as
a compass to guide the choices and
hardlines and softlines. These include
a center in Mexico City that focuses
trade-offs that are necessary to
on emerging markets, and another in
design operations in this complex
the UK that serves Walmart’s George
environment.
private-label apparel brand. The
The right choices can enhance company wants to source fresh food
a retailer’s competitive essence products directly as well—as its ASDA
and thus improve its customer stores in the UK have long done, from
relevance and efficiency. Surprisingly, continental Europe. Before rolling this
such choices are often counter- idea out internationally, Walmart first
intuitive. Take global sourcing. Many piloted it (with apples) in its North
international retailers, including American stores6.
Walmart and Ahold, are working to
centralize and standardize their global
sourcing functions. Yet we found one
European retailer that decided to keep
its sourcing decentralized to leverage
local negotiations and supplier
storage and delivery in select markets.
This approach is better aligned
with the company’s entrepreneurial
culture and has enabled it to
reap the benefits of just-in-time
inventory. While counter-intuitive, the
5BusinessWeek, “IKEA: How the Swedish retailer
became a global cult brand,” November 14, 2005.
6FinancialTimes, “Walmart aims to cut supply
chain costs,” January 3, 2010.
Recalibrate your operating model as market
and segment priorities evolve
Monitor and adapt
to changing conditions
The impulse to internationalize
swiftly is understandable. However,
an ad hoc approach can lead to
operational duplication and confusion,
rather than efficiency, particularly
if a retailer has entered individual
markets opportunistically over a long
time without proactively looking for
cross-market synergies. Conditions
within and between markets change
constantly—so retailers must regularly
reassess their operating model’s
effectiveness and adjust the model
when needed. Some large retailers
have migrated towards “in-the-box”
solutions that include standardized
templates for systems and processes
that can be readily leveraged in new
locations. But even these companies
need to modify their operations to
adapt to new risks and opportunities
as they expand into new markets,
channels and segments.
When markets are diverse and
rapidly evolving—like China—timely
recalibration becomes critical.
Consider Starbucks, which entered
several Chinese provinces via joint
ventures over the past decade. This
strategy rapidly established the
retailer’s presence in China and
positioned it to quickly learn what it
takes to be locally relevant. Starbucks
expects that its sales in China will
overtake those in the UK and Japan
over the next few years. To achieve
operational consistency and efficiency
across the wider organization,
Starbucks has exercised the option to
buy back operations from some of its
JV partners7.
Similarly, Best Buy acquired a 75
percent interest in Five Star, China’s
third-largest home appliance retailer
in 2006. It then opened its first
Best Buy store in China in 2007. In
2009, Best Buy converted Five Star
into a wholly owned subsidiary by
purchasing the remaining 25 percent
stake. Best Buy has not yet integrated
Five Star, preferring instead to run
a dual-brand strategy in China
that includes its own stores until
it knows more about the country’s
many different markets. The company
currently balances customer relevance
with efficiency by leveraging the
strong local Five Star brand and only
gradually integrating and sharing
select operational practices from
their traditional Best Buy “big box”
format—such as selling approaches
and tailoring the product mix8.
Recalibrate after acquisition
and organic expansion
As retailers expand their international
footprint through acquisition
or organic expansion, regular
recalibration becomes still more
critical, because opportunities for
cross-country and cross-business
operational efficiencies multiply.
Chilean retailer Cencosud has
expanded aggressively through
acquisition and has systematically
recalibrated its operating model.
While integrating 10 acquisitions
over the last seven years, it reportedly
launched more than 50 new projects
(for instance, centralization of back-
office functions) to capture cross-
market and cross-organizational
synergies9.
Other retailers are organically
expanding into new business
segments (product, service or channel)
to increase share of wallet and win
new customers around the globe.
However, many don’t evolve their
operating models to best serve these
different business segments. An
operating model that worked well
for traditional brick-and-mortar
retailing won’t likely be right for the
e-commerce portion of the business.
In addition, customers may prefer a
cross-channel operating model. The
same holds true for retailers entering
new product or service categories
that require different value chains
than their traditional assortment.
We observed that a number of food
retailers have had to revisit their
entrenched operating models when
they expanded into higher margin,
shorter lifecycle offerings. Other
retailers run their different business
segments independently of one
another, without looking for cross-
segment or cross-market synergies
and scale.
Plan and organize to support
future international growth
Given intense market pressures,
retailers are eager to enter new
markets and business segments
quickly. Speed is important, but so
is planning—and then executing on
the plan with regular recalibration.
The Netherlands’ Ahold and France’s
Carrefour offer apt examples. These
companies are restructuring their
operating models to create an
empowered regional layer of decision-
makers. The layer is thin enough to
avoid excessive bureaucracy and close
enough to markets to support local
responsiveness. Yet it has sufficient
scale to deliver regional synergies
and efficiencies.
7AsiaTimes Online, “Starbucks soars in China,”
June 15, 2006. http://www.atimes.com/atimes/
China_Business/HF15Cb06.html.
8NirajDawar and Ramasastry Chandrasekhar,
“Best Buy Inc. – dual branding in China,”
Harvard Business Review, June 10, 2009.
9Cencosud, “Presentación Santander-Cancún,”
January 2010.
7
Meanwhile, some retailers have
incorporated enterprise efficiency
into their operational expansion from
the start. For example, New Look, a
UK-based value fashion retailer, has
launched a major multi-year effort
to ensure that its global trading
platforms and systems will be able to
support future international growth.
Foster processes to drive
continuous improvement
A company’s culture, leadership
and people play critical roles in this
process of regular recalibration.
Retailers that have established formal
or informal mechanisms to identify,
gather and share ideas from across
the organization to drive continuous
improvement are ahead of the game.
For example, Tesco uses TWIST—“Tesco
Week in Store Together”—to generate
ideas for improving the business. The
company sends thousands of head
office managers out to work in a
store for a week every year so they
8
can personally experience Tesco’s
products and business processes and
gather employees’ ideas for making
them better, simpler or cheaper10.
One employee suggested putting bar
codes on sandwiches on the front of
the package to make them easier to
scan. This idea was implemented and
has reportedly saved Tesco £500,000
by reducing time spent scanning
sandwiches11. TWISTs have not been
limited to its home market in the
UK; international TWISTs have taken
place in several countries including
Malaysia, Poland and Hungary12.
Carrefour, for its part, is transitioning
from a highly decentralized culture
to one that proactively disseminates
best practices across its organization
(see sidebar)13. Employees with key
analytical skills are playing a role in
this process, by leveraging market,
segment and functional data to
help the company decide when and
how its operating model needs to
be recalibrated. Other industries,
such as financial services, have
more experience in organizing and
deploying international analytics. For
example, GE Money has recognized
that global analytical talent
development and deployment are
critical to achieving both customer
relevance and operational efficiency
(see sidebar)14.
10SirTerry Leahy, “What innovation means to
Tesco,” Economic & Social Research Council,
March 2006.
11TalkingRetail, “Tesco drives growth
through innovation,” June 1, 2007. http://
www.talkingretail.com/news/industry-
announcements/5174-tesco-drives-growth-
through-innovation.html.
12Tesco,“Listening and engaging,” accessed
June 22, 2010. http://www.tesco.com/csr/
downloads/pdf3.pdf.
13Carrefour analyst presentation, “Share best
practices and innovations,” 2009.
14Accenture
(Jeanne Harris, Elizabeth Craig
and Henry Egan), “Counting on analytical
talent,” March 2010.
Carrefour: Sharing best practices
French retailer Carrefour boasts a workforce of nearly
500,000 (the world’s seventh-largest private sector
employer) and more than 15,000 hypermarkets,
supermarkets, discount and convenience stores in some
35 countries15. Founded more than 50 years ago, it is the
world’s second-largest retail group in terms of revenues.
Sheer size, however, is no guarantee of future international
success. Accenture research reveals that to internationalize,
organizations must promote continuous learning and
improvement to capitalize on market opportunities. They
must also evolve their operating model as they enhance
their presence in key markets or enter new markets.
And they must ensure that relevant innovations from
headquarters or international locations are disseminated
across their entire operations.
Early in its globalization journey, Carrefour relied on French
expatriates to establish its presence in new markets. This
made sense at the time, because the company had a
strong pool of experienced store managers. The managers
understood the Carrefour hypermarket model and could
apply it to international markets, particularly new markets
like China, which were unfamiliar with supermarkets16.
However, as Carrefour’s international locations proliferated,
executives found that the “pioneer model” wasn’t helping
Carrefour attract enough talent or achieve the degree of
localization required to succeed in more diverse markets.
In the late 1980s, Carrefour became one of the first
retailers to set up a corporate management training
center, with Institut Marcel Fournier in France as its first
Figure 5. Carrefour’s competence centers19
Formats and Product and Product flow and
channels service ranges supply chain
Hypermarket Carrefour brands Product flow
Supermarket Fresh Logistics
Hyper/Cash Bazaar In-store productivity
Convenience Store Methods/Category Check-out counter
Management
Franchise productivity
Methods/Purchasing
eCommerce
Services
center. Carrefour then expanded the effort, creating nine
training centers around the world to train and develop
store managers locally. However, these centers traditionally
focused on the regions they served and did not promote
cross-market knowledge sharing17.
So, in 2009, Carrefour launched a three-year effort to
transform its operating model to disseminate “global
methods but not global solutions.” The initiative has global
knowledge sharing as its core objective. Carrefour recognizes
that fostering cross-border knowledge sharing will require
cultural changes, including new incentives that encourage
managers to seek more open sourcing of innovation. As part
of the initiative, the company will task dedicated teams
in three new “competence centers” with gathering and
disseminating best practices in one of three core business
functions (see Figure 5)18.
Carrefour has found that smaller and newer markets may be
less inhibited when it comes to innovating and piloting new
ideas because they do not have entrenched organizations
and processes. Take Bulgaria, where Carrefour installed an
entrepreneurial team to develop new practices for boosting
in-store productivity. The Bulgarian division segmented the
store workforce into two teams—one for providing service on
the shop floor; the other, for managing stock in the storage
room. The division leader coordinated the teams to facilitate
product flow and match fluctuations in demand over the
course of a day. Workforce productivity improved 30 percent
over the norm20.
15Carrefour, “2008 sustainability report,” April 28, 2009.
16China Daily, “Carrefour’s expansion in China,” August 12, 2008.
17Carrefour,
“Document de reference 2009,” April 22, 2010.
18Carrefour analyst presentation, “Share best practices
and innovations,“ 2009.
19Ibid.
20Ibid.
9
GE Money: Unleashing the power of
international analytics
Knowing when to recalibrate can be difficult, but more and
more retailers are recognizing that advanced analytical tools
and technologies can help. However, many retail executives,
like many companies, do not know who is performing
their company’s analytics or where they reside in the
organization. And they don’t view their analytical talent as
a distinct and valuable workforce. In many retail companies,
analytical talent is isolated in functional silos, such as
pricing, inventory management or finance. Some of these
employees are bored because the company isn’t fully using
their skills. Others are overworked because they’re scarce.
Accenture research suggests that companies looking to
build a strong analytical workforce should centralize and
coordinate their analytical talent. But a growing number
of retailers have expressed interest in a hybrid model.
According to this model, top analytical talent is centralized
to work on high-priority projects that require advanced
analytical skill sets. Meanwhile, lower-level analysts remain
aligned to specific functions and get training, support and
networking from global or regional Centers of Excellence.
This model tries to strike a balance between keeping
analysts “close to the business” and “close to each other.”
10
While retailing is definitely starting to embrace analytics,
it is not as advanced as other industries—such as
financial services— in its development and deployment of
international analytical talent. Take GE Money, the banking
and consumer finance services unit of GE. The unit operates
in more than 50 countries. Its offshore analytics centers
in Shanghai and Bangalore place their staff on temporary
assignments in a variety of business operations roles
through a formal job-rotation program. This program has
aided retention of analytical talent (in very competitive
markets). It has also improved employee engagement by
offering analysts new learning opportunities, task variety
and a sense that they are making meaningful contributions
to the business across the globe21.
Analytics promises to drive significant growth and efficiency
for retailers. Moreover, it will rise in importance as retailers
further penetrate data-rich channels like e-commerce
and m-commerce, as evidenced by the advanced analytics
capabilities of companies like Amazon and eBay. In particular,
predictive analytics may change the game in fashion and
food retailing by helping companies anticipate consumer
preferences and tailor their offerings accordingly22.
21Jeanne Harris, Elizabeth Craig and Henry Egan, “How successful
organizations strategically manage their analytical talent,” Strategy &
Leadership, 2010, Vol. 38, Issue 3, p. 15-22.
22Accenture (Jeanne Harris, Elizabeth Craig and Henry Egan), “Counting on
analytical talent,” March 2010.
Leverage dynamic networks
Use new relationships to open
up new markets, segments
and channels
As power shifts to consumers, cost
pressures mount, technology advances
and skilled resources become limited,
retailers are finding it difficult to
drive all value-chain activities on
their own. They are discovering that
collaborating with new and existing
suppliers, customers, employees
and competitors in novel ways can
help them innovate, connect with
customers and drive more profitable
growth. We refer to these new
strategic and inventive collaborations
as dynamic networks.
For some retailers, dynamic networks
can help change the game. In August
2009, the U.S. home improvement
retailer Lowe’s, for instance,
announced a joint venture with
Australia’s Woolworths. The partners
are planning to acquire hardware
distributor Danks and add it to their
emerging home improvement network
in Australia. The agreement creates
a new business for Woolworths and
a new market for Lowe’s, whose
international presence until now
has been limited to Canada and
Mexico. It also means a better
value proposition for Australian
customers23. Walmart, meanwhile, is
joining forces with Hong Kong-based
supply chain management giant Li &
Fung to achieve even higher levels of
efficiency and competitive advantage
(see sidebar)24.
Make the right network choices
Taking full advantage of dynamic
networks requires more than just
identifying the right partner(s).
Retailers must assess when and where
to leverage partners to maximize
customer relevance and operational
efficiency. This involves deciding
which parts of the value chain to
focus on and which locations and
which partners are optimal for your
company.
In Asia, Japan’s Fast Retailing’s
UNIQLO brand has joined with
Taobao, China’s largest Internet
retail website, to bring the Japanese
company’s casual wear to Taobao’s
100 million online shoppers. Fast
Retailing is also stepping outside its
normal category by collaborating
with Selfridges to offer a new and
exclusive UNIQLO men’s collection
at this higher-end retailer25.
Consider too Alliance-Boots’ design
and sourcing partnership with
Mothercare, which makes children’s
clothing, and the European personal
products retailer’s reciprocal
selling arrangement with Waitrose
supermarkets. Both deals enable
customers to shop and purchase from
the expanded assortment in stores
or to order online and pick up their
purchases in stores using Alliance-
Boots’ Click-and-Collect service26.
Leverage new networks to
connect with customers
Retailers must also deploy operating
model levers, such as technologies
and processes, in new and innovative
ways to maximize value from dynamic
networks. Witness, for example, how
My Starbucks Idea has revolutionized
the traditional customer comment
box. The web-enabled platform,
which lets Starbucks employees
and customers generate and test
new ideas, has launched dozens of
successful innovations. These include
the “splash stick,” which plugs the
hole in the beverage container’s lid
and stops coffee from sloshing out
while the customer is on the move27.
Other retailers are using mobile
technologies and social networking
to tap into the power of new
networks. Take Best Buy’s Twelpforce.
This service invites customers to
communicate with Best Buy’s
155,000-strong global workforce,
including the iconic Geek Squad
of technology experts, via Twitter,
and exchange opinions and ideas28.
Meanwhile, Gap’s StyleMixer iPhone
app takes customer service to new
heights by using mobile and GPS
technology to locate the customer’s
nearest store and then offering them
exclusive, store-specific offers and
discounts29.
23LogisticsMagazine, “Woolworths-Lowe’s
acquires Danks,” September 7, 2009.
24Forbes,“Billionaire brothers tie up with
Walmart,“ January 29,2010.
25Alibaba,
“Taobao partners with UNIQLO to
grow China’s online fashion market,” April 23,
2009. http://news.alibaba.com/article/detail/
alibaba/100090874-1-taobao-partners-uniqlo-
grow-china%2527s.html
26MVI Worldwide, “Alliance-Boots to focus
on shopper convenience,” February 15, 2010.
27Starbucks,
“Ideas so far,” accessed June 14,
2010. www.mystarbucksidea.force.com.
28Wired Magazine, “Work smarter: Best Buy,”
April 2010.
29Geeksugar,“Gap style mixer iPhone app hooks
you up with discounts,” August 27, 2008. http://
www.geeksugar.com/Gap-Style-Mixer-App-
Gives-You-Discount-When-You-Open-4392584
11
Channel the power
of enabling technologies
Some retailers have started using
crowd or open sourcing and cloud
computing to mine customer insights
from new sources or to develop more
customer-centric solutions, directly or
via alliances with other stakeholders.
The Gap, for example, ran a special
contest in 2009 designed to tap into
the network of freelance iPhone
application developers. The initiative
invited developers to compete in
creating a new application that
embodies Gap’s style and appeals
to customers in an innovative and
original way30. Meanwhile, well-
known fashion retailers such as
Calvin Klein and Coach are mining
the treasure trove of customer data
generated by Polyvore.com, whose 1.4
million registered users create their
own fashion designs from pictures of
12
real clothes. By tracking the activities and leadership teams. Many will
of these influential independent need to build and deploy specialized
designers, apparel retailers can gain processes and communication skills
new insights into consumer fashion to monitor and manage their network
trends and styles31. relationships.
The rewards promised by dynamic
Manage the rewards and risks
associated with dynamic networks networks far outweigh the risks—for
those who manage their networks
Leveraging dynamic networks presents
adroitly. Retailers that prioritize
rewards and risks. Some risks are
engaging new partners and swiftly
obvious, such as leaks of confidential
implementing required operational
data during collaborations with
changes will have first choice of the
multiple partners. To manage the
strongest strategic partners.
risks, companies must revisit their
operational processes and technology
systems to ensure they safeguard key
data and proprietary IP from misuse.
Retail executives should also consider
that managing a wider and deeper
portfolio of relationships places
new demands on their workforce
30Mobile
Commerce Daily, “Gap announces
winners of iPhone app contest,“ November 16,
2009.
31The New Yorker, “Fashion Democracy,“ March
29, 2010.
Walmart and Li & Fung:
Sharing scale and efficiency
Hong Kong-based Li & Fung began operating more than a
century ago as a trading house that exported Chinese silks
and porcelain. It’s now the world’s leading supply chain
management company for consumer goods. Its capabilities
extend well beyond global sourcing to product design,
production and logistics. Small wonder then that Walmart,
the world’s largest retailer, has recently elevated Li & Fung
from wholesale supplier to strategic partner. Li & Fung will
act as a non-exclusive direct buying agent for a portion of
Walmart’s hardlines and apparel goods32.
Historically, Li & Fung created separate divisions to handle
each large customer. But it is changing its operating
model to support the partnership with Walmart. Li &
Fung is creating a separate company called WSG to
handle Walmart’s business, estimated at US$2 billion
of purchasing in 2010 alone33. Li & Fung will likely use
the new revenues from increased volume to fund key
acquisitions to expand its international scale and footprint.
Walmart stands to derive significant benefits as well,
including major cost savings and faster speed to market.
The retail giant can also expect improved product quality
from Li & Fung’s extensive supplier network in more than 40
countries, as well as from the Asian company’s specialized
international supply chain processes, technologies and
in-market expertise.
WSG will be staffed by global sourcing employees from both
companies, which will enable the partners to pool sourcing
experience, skills and networks. Li & Fung operates 80
offices worldwide, including a new hub office in Istanbul,
Turkey, to help serve Europe, the Mediterranean, the Middle
East, North Africa and the former Soviet republics. This
scope will help Walmart expand and diversify its sourcing
options, as well as mitigate sourcing risk34.
The partnership will also enable both companies to get to
know each other better as the operating models for WSG,
Walmart and Li & Fung evolve—though Walmart retains the
option to buy WSG in 201635.
32Store Brands Decisions, “Walmart creates global merchandising centers
to streamline sourcing,” February 2, 2010.
33Financial Times, “Walmart reveals supply deal with Li & Fung,” January
29, 2010.
34Home Textiles Today, “More details emerge on Walmart, Li & Fung deal,”
January 28, 2010.
35Financial Times, “Walmart reveals supply deal with Li & Fung,” January
29, 2010.
13
As markets continue to become more liberalized, built out
and interconnected, more and more retailers are turning to
internationalization to drive incremental growth. These companies
are increasingly pursuing less capital intensive options for
international expansion, such as e-commerce, m-commerce and
franchises. Technology advances are enabling higher levels of
efficiency and more flexible and affordable solutions for retailers’
international operations. These forces are converging to make
capitalizing on international growth an imperative for most
retailers. Retailers seeking to go global or expand their international
footprint must ask themselves how they will get into the game or
win it before they’re outmaneuvered by rivals. The answers lie within
their international operating model.
By more effectively organizing around their competitive essence,
regularly recalibrating their operating model as their markets
and business evolve, and strategically leveraging dynamic
networks, retailers can drive higher levels of performance in
their international operations.
14
Core Project Team
Joshua B. Bellin
Ryan Coffey
Stephane Girod
Amanda M. Hilgers
Susan S. Mann
Ashley B. Miller
Armen Ovanessoff

To find out more about how
Accenture can help your organization
with its international operations,
please contact:
Janet Hoffman
Global Retail Industry
Managing Director
Dave Richards
North America Retail Lead
For questions related to the research,
please contact:
Susan S. Mann
Global Retail Industry Program Manager
susan.s.mann@accenture.com
Armen Ovanessoff
Accenture Institute for High Performance
armen.ovanessoff@accenture.com

Juan Manuel Rebollo

Europe and Latin America Retail Lead

Michael Yee
Asia Pacific Retail Lead

15
About the Accenture
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