Burned in the USA: foreign companies that failed to conquer America
Harriet Noble
01 August 2018
Foreign failures
The US is a difficult country for foreign businesses to crack because of its sheer size, and the diversity within it. Many companies that are a huge success elsewhere fail to succeed. Here are some big businesses that tried but failed.
Marks & Spencer
The UK's Marks & Spencer Group dates back to 1884 and predominantly sells clothes, as well as home and food products. Currently, the company has 1,035 stores in the UK and 428 worldwide. Along with its choice of luxury food, the company is probably most famous for its popular range of underwear.
Marks & Spencer
In 1988 Marks & Spencer acquired US male clothes retailer Brooks Brothers for $750 million (£565m). With department stores all across the US, the plan was to use Brooks Brothers as a platform to launch M&S stores in America. But the plan didn't work.
Marks & Spencer
Its range of clothes was deemed old-fashioned and too formal, and other brands like Banana Republic and Gap became the draw for men looking for modern, casual clothes. Sales were abysmal and M&S sold Brooks Brothers to Retail Brand Alliance in 2001 for just $225 million (£169m), a loss of $525 million (£396m).
Suzuki
Suzuki started off as a one-man-band, a Mr Michio Suzuki, who made and sold weaving machines in Japan back in 1909. Fast forward to today, and the company is a huge global success story making and selling a range of vehicles all over the world. In 2014, Suzuki was the ninth biggest automaker by production worldwide, its cars selling particularly well in Hungary and Australia.
Suzuki
In 1985, the company expanded to the US and initially had success with its Samurai car. But its reputation was tarnished when consumer reports alleged the Samurai was susceptible to rolling over in tests and a very public lawsuit followed. The company had some success with later models and seemed to have weathered the economic crisis of 2007, but ultimately its limited product line-up and non-competitive pricing was blamed for poor sales.
Suzuki
By 2012, the American Suzuki Motor company announced that it would stop selling cars in the United States. The company by then had filed for bankruptcy and was $346 million (£260m) in debt.
WHSmith
British retailers WHSmith specialises in selling books, stationery and newspapers and can be found in most UK towns and cities, railway stations and airports.
WHSmith
In 1985 WHSmith began operating shops in the US, predominantly in airports and hotels. The plan was for WHSmith to be the go-to place for shoppers in need of a book or magazine for their flight or stay at a hotel.
WHSmith
But the company struggled to flourish in the US market and things went from bad to worse when the demand for tourism and travel diminished after the September 11 2011 terrorist attacks. The company began to close unprofitable bookstores and newsstands to reduce losses but by 2003 it was forced to sell up for a reported $79 million (£49m). The airport division was sold to the Hudson Group for $66 million (£41m), and the hotel retailing unit was bought by former managers for $13 million (£8m).
Carrefour
French company Carrefour is one of the largest supermarket chains in the world, successfully running over 12,000 stores across more than 30 countries in Europe, Asia and Africa.
Carrefour
Carrefour tentatively approached the US market, opening up one hypermarket in Philadelphia in 1988 and one in New Jersey in 1994 but closed both in 1994 after poor sales. Why did they fail?
Carrefour
A reluctance to embrace US cultural shopping habits was partly blamed for its failure. Carrefour is a one-stop discount store where shoppers can pick up anything from fruit and shampoo to fridges and car supplies. But US consumers were not accustomed to these wildly different items being lumped together under one roof.
Carrefour
And a lacklustre marketing campaign and existing well-established supermarkets such as Walmart were other reasons why the French company failed to make an impression.
Hailo
UK-based company Hailo had huge success with its taxi app that matched taxi drivers to passengers in just two quick taps. Launched in London in 2011, it soon racked up 2.5 million passengers and began to open up in other cities around the world.
Hailo
When Hailo arrived in New York in 2013, success seemed to be in sight. There was a lot of buzz behind the company, not to mention funding, with leading venture firm Union Square Ventures investing $30 million (£22m) into the business.
Hailo
The idea was that Hailo would attract the yellow cab market, gaining a network of existing drivers by having them download its app to connect with potential passengers. But the city’s taxi drivers didn’t warm to the app. At the same time, rivals Uber slashed its prices, and won the taxi app contest stateside. Having only been operating in the US for a year, Hailo announced it was removing its business from North America in 2014, citing ‘astronomical’ marketing costs.
Daewoo
Daewoo Motors was one of South Korea’s best exports, successfully exporting to countries all over the world where it won a loyal following by selling directly to customers rather than through car dealers.
Daewoo
When the company expanded to the US, it tried the same approach, this time hiring college students to sell its line of economy cars. The plan didn’t work, however, and it resorted to selling via traditional dealerships. Sales did not pick up, with US drivers opting for other South Korean car makers, such as Hyundai.
Daewoo
The Asian financial meltdown of 1998 further diminished the company’s foothold in the US and elsewhere and the whole company was bought out by General Motors in 2002.
Tesco
The UK multinational food retailers Tesco was doing a roaring trade in the 1990s, becoming Britain’s biggest food retailer by 1995 and the third-largest retailer in the world by the early 2000s, with stores all across Europe and Asia. Keen to expand even further, Tesco entered the US market in 2007, opening its first Fresh & Easy store in Hemet, near Los Angeles.
Tesco
Over 200 stores were then rolled out across California, Arizona and Nevada. Tesco put a total of $1.3 billion (£1bn) into this US business; its original plan was to have a chain of 1,000 stores on the west coast and then to expand on the east coast. But the gamble didn’t work out and it turned out to be the biggest-ever British retail failure in the US.
Tesco
Why? Many of the locations of the supermarkets tended to be in working class areas that were enduring economic hardship and shoppers didn’t like the small-sized supermarkets, the shrink-wrap packaging or the self-checkout systems. In 2013 Tesco announced that it was pulling out of the US market and that same year Fresh & Easy filed for bankruptcy.
WeChat’s multi-purpose messaging and social media app was launched in 2011 and is something of a phenomenon in China. It’s been described as a super app because of its wide range of functions that include gaming, food delivery and e-commerce. Users can even book a doctor's appointment or pay an electricity bill using the app. As of March 2018, the company had a whopping one billion monthly active users.
WeChat has had some success in neighbouring countries, such as Bhutan and Taiwan, but so far it has failed to catch on in the US. Why? For one thing, WhatsApp is the current app that most people are using in the US and it has proved difficult to convince people to switch over. After all, if your friends aren’t on the app, then there is no reason to want it.
Also, WeChat in China is very different from WeChat elsewhere. While the Chinese version has a plethora of functionalities, because the company has established strong relationships with local companies, WeChat in the US, at present, is not much more than a social app. Unless it takes the time to invest in the app in the way it has in China, it's set to remain a failure in the US.
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