Go Where Customers Are

"If you’re only selling in this country, you’re missing out on 95 percent of the world’s customers,” UPS Americas president Romaine Seguin told attendees of the NRF Global Supply Chain Summit last month in Columbus, Ohio. “Seventy percent of retail sales are happening outside the U.S.”

You could almost hear the collective breath drawn by nearly everyone in the room as the enormity of those figures sunk in. With nearly a decade of experience in international logistics, most recently as UPS’s COO for the Europe, Middle East and Africa regions, Seguin has had a front row seat at the disappearance of world borders. Her recommendation to retailers: Go where the customers are.

Retail sales are growing fastest in places like Germany, Norway and Indonesia, Seguin said, yet only 1 percent of U.S. companies are exporting goods to those parts of the world. “We’ve fallen behind on trade and that has to change — or the U.S. will risk losing business.”

Her call to action is appropriately timed. While domestic retail sales have rebounded and small yet steady gains are being logged, there’s little question that the U.S. market is saturated and that its shoppers are financially leveraged and becoming more frugal. Study after study suggests that global consumer spending is shifting away from the U.S. and towards large emerging markets.

I’ve written enough about retailers’ decisions to expand beyond U.S. borders to know that it’s not as easy as hanging a bunch of “Grand Opening” banners. Multiple trials (and errors) have taught merchants the importance of working with local managerial talent and learning local customs, not to mention executing a well thought-out strategy. Still, the fact that many have already ventured abroad and shared valuable lessons suggests that future obstacles could be less treacherous.

There’s another compelling reason U.S. retailers and suppliers should develop a more global outlook — a rising middle class. Data compiled by the World Bank estimates that the global middle class is likely to grow from 430 million in 2000 to 1.15 billion in 2030. In 2000, developing countries were home to 56 percent of the global middle class; by 2030, that figure is expected to reach 93 percent. Mindful of the fact that the global middle class may look very different from the U.S. middle class, companies need to create new products that take price sensitivity into account.

International business currently accounts for 40 percent of UPS’s profit, and company CEO Scott Davis has set a goal of doubling exports within five years. It’s a goal Seguin believes is well within reach.

I’m not suggesting that global expansion will immediately yield great riches for all — or even most — retailers, but it represents a remarkable opportunity, and the time is right to test the waters.