Dynamic Processes of Territorial Embeddedness in International Online Fashion Retailing

abstract

Global retail expansion involves dynamic relations between retailers and variegated institutional, competitive, and consumer-based demands across different spatial scales. Economic geographers have framed these processes through the interrelated concepts of territorial, network, and societal embeddedness of store-based retailers, but with a neglect of online retail transnational corporations, which might enter overseas markets with minimal risk and sunk cost. This research assesses the relevance of concepts of embeddedness in the light of virtual retail networks by assessing how knowledge from the home market mediates any perceived need to localize within host-market consumer cultures and institutions to achieve legitimacy, and, in turn, whether these activities might occur as a virtual or physical process. We undertook extensive case study research within five leading international online fashion retailers headquartered in the UK, involving fifty-five semistructured interviews with chief executives, and with managing, operations, buying, and merchandising directors. Our findings reveal market entry to be dominated by an inward-looking societal embeddedness approach with limited investment in overseas physical infrastructure and personnel, since the management of product ranges and pricing, along with merchandise fulfillment, typically reside in the home market. Yet, with international experience, we conceptualize a staged and currently limited investment in territorial embeddedness through local subsidiary offices critical to realizing network embeddedness with the fashion media and the reorganization of fulfillment within some key host countries and wider supranational regions. Such developments demand increased investment and a decentralization of authority that will, in turn, likely necessitate significant reorganization of these emergent international firms.

Key words:

• global retailing
• online retailing
• territorial embeddedness
• societal embeddedness
• networks
• distribution

JEL codes:

• L81
• M16
• L22

Acknowledgments

We are grateful to the executives of the five case study retailers for their participation in this research. We also appreciate the helpful comments of colleagues at the Revisiting Services in the Regional Economy Special Session at the Regional Studies Association Annual Conference in 2017, at the Practice, Space and the Economy (Revisited) Special Session at the 5th Global Conference on Economic Geography, Cologne in 2018, and more recently at the School of Management Seminar Series, University of Stirling, when earlier versions of this article were presented. Finally, we are thankful for the feedback of the editor, Jim Murphy, and three anonymous referees.

Notes

¹ Using fixed 2017 exchange rates and constant 2017 prices sourced from the Euromonitor Passport database.

² A staged perspective on retail internationalization is to some extent mirrored in Dawson and Mukoyama’s (2014) model of increasingly sophisticated processes and forms of retail internationalization.

³ Our interviews lasted between forty and ninety minutes and were normally audio recorded. The subsequent transcription generated in excess of one thousand A4 pages of text that were then thematically coded independently by two of the research team. To maintain the anonymity of interviewees in our analysis, direct quotes are introduced via an interview number, but the relationship to the relevant retail firm case is made explicit.

⁴ Fast fashion is a concept whereby designs from the catwalk are rapidly replicated on the high street in a process facilitated by quick response relationships with the manufacturing base and throughout the supply chain (see Tokatli and Kizilgun 2009). Meanwhile a lifestyle fashion brand refers to the tailoring of a retail offer closely to the lifestyles of a specific market segment. As such, it embodies symbolic meaning and values for the lifestyle of the particular consumer group and extends the function of the retailer into the lives of consumers (see Helman and de Chernatony 1999).

⁵ One significant pure play internet fashion retailer to invest in physical logistics infrastructure is ASOS, which, at the time of writing (2018), has made the decision to invest in a second distribution center in the US at a cost of £31m to reduce fulfillment times. This complements its current modestly sized facility that manages only 25 percent of US orders, with the remainder dispatched from the UK home market.

⁶ The one exception to this is Retailer E that operated an extensive international store estate alongside its online capability so was committed to widespread subsidiary country office networks.