Despite being one of the most globalised sectors, its companies, even the big ones, continue focusing the majority of their exports in near-by markets.
The Uppsala model traps fashion. Neither Inditex, H&M, Uniqlo nor Gap scape this international trade theory that underlines the limits of globalisation. Not even e-commerce behemoths are aliens to it. Amazon, Alibaba, Zalando or Asos are also unable to skip this rule which came up during the seventies in the University of Uppsala. Despite having operations all around the world, none of them is strictly global.
The researchers Jan Johanson and Paul Wiedersheim pointed out in the seventies the stages of a company’s internationalisation process. In the pre-Internet era, the authors stablished a first period of local market development, a second stage of landing into markets which are culturally related and geographically close and, lastly, a third phase of openness to faraway countries with different cultures.
Four decades after the study, two decades after the mantra ‘the world is flat’ and in full-on Internet era, Uppsala’s model resists, at least for fashion business.
Inditex, the largest fashion distribution brand around the world, with commercial activities in almost 200 countries and regions, continues focusing most of its business in Europe. About 67% of the Galician firm’s stores are still located in Europe, contrasting with 11% in America and 22% in Asia and the rest of the world.
The proportion is similar in terms of income. The company led by Pablo Isla generated in 2017 a 16.3% of its volume of business in Spain. Inditex’s percentage of business in the local market was even superior last year, whereas the revenue provided by America meant a 15.6% of its income. Europe, on the other hand, represented last fiscal year a 44.9% of Inditex’s volume of business, whilst Asia and the rest of the world contributed a 23.2%.
H&M, on its regard, has Germany as its main market. In fiscal 2017, the Swedish fashion distribution giant generated in German territory 15.8% of its revenue. Its local market, with barely ten million inhabitants, occupies the sixth position in the raking of the brand’s main destinies. The United States, on the other hand, contributes 12% of the volume of business, and China, a 4.75%.
Nevertheless, eight out of the ten main markets of H&M are European and, all of them together, produce 45.8% of its total sales. Regarding number of stores, however, the Swedish firm is the only one which distances itself from the norm, as its biggest networks are located in the United States, with an amount of 536 stores by the end of fiscal 2017, and in China, with 506 shops.
In the case of Uniqlo, Japan continues grossly being its biggest market. A 43.5% of the company’s volume of business in 2017 was precisely generated in local markets. Abroad, the main destiny of the Japanese fashion distribution leviathan is China, followed by South Korea and the region of Southeast Asia. Beyond Asia, the company operates in the United States and some European countries.
The North American Gap, for its part, is in line with its Japanese rival. The majority of retail networks from all its different firms are located in North America. Thus, 63% of its flagship stores were located in this area by the 3rd of February 2018 (date of the end of 2017 fiscal year); the percentage shoots up 98% in the case of Old Navy and goes up to 92% in Banana Republic’s. Regarding volume of business, Gap produced last year 79.2% of its income in the United States alone. Counting Canada too, the percentage reaches an 86.6% of the total. Asia provided the group with 7.9% of its business, and Europe with a 4%.
For internet titans, the background is no different. Regarding Amazon, for example, two out of three parts of their e-commerce business are still produced in the United States. Likewise, in fiscal 2017, the American e-commerce giant had an income of 106.11 billion dollars (93.37 billion euros) in the local market, contrasting with the revenue of 54.29 billion dollars (47.78 billion euros) it had abroad.
Alibaba experiences a very similar situation than that of Amazon, but shifting it to China. Out of the total 133.88 billion yuan (16.9 billion euros) that the Chinese brand had as its e-commerce business income, 89.4% came from its local market alone in 2017. However, last fiscal year, the firm took some steps further abroad, taking into account that its volume of business surpassed for the first time ever the 10%.
In Europe, Zalando also focuses its activity in Germany and its immediate area of influence: the two other countries from the Dach region (German-speaking Europe), Austria and Switzerland. Last year, the e-commerce German company produced 33.8% of its business only in local markets, and 61.9% in the whole of the Dach region. The other third part of Zalando’s income is obtained from the rest of European countries.
The British Asos, on the other hand, also concentrated its revenue in the United Kingdom and the European Union last fiscal year. Therefore, out of the 2.35 billion pounds sterling (2.64 billion euros) of the company’s revenue in 2017, 36.6% came from local markets and 31.4% from other countries in the European Union. The United States is the next market regarding volume of business, with 13.2% of sales.