According to research by the Polish Economic Institute, 37% of Polish companies have decided to expand internationally [1]. Unfortunately, in the retail industry, this percentage is relatively lower, at 33% (for comparison: as many as 58% of Polish companies operating in the TSL area conduct business abroad). What is stopping retailers from starting operations outside the country?
Fundamental challenges of international expansion
Overseas expansion may be a natural stage of business development in the retail industry. However, many store owners choose not to start operations outside their country. This is not always the result of caution or natural resistance to change. Sometimes, despite their openness to new markets, foreign investment proves to be too much of a challenge.
Major barriers to international expansion include:
- Too much competition in the foreign market,
- Ignorance of the country and its people,
- Lack of knowledge about what marketing strategy will work in another market,
- The need to adapt the offer to consumer demands and expectations,
- Lack of financial and human resources,
- A sales system unsuited to the realities of different markets,
- legal issues.
Local regulations a major challenge for retailers
The last item on the list of barriers is a particularly significant barrier due to the high dynamics of changing laws. Retailers have to keep up to date with regulations passed in the countries where they operate. We are mainly talking about business rules, tax settlement regulations or customs formalities.
Recently, local changes relevant from the perspective of the retail industry have taken place in Slovakia and Romania, among others. In the former, new VAT rates were introduced, requiring retailers to upgrade their fiscal equipment and update their POS software. In Romania, on the other hand, new regulations made it mandatory to record information about the province in the buyer’s address shown on VAT invoice printouts.
International expansion and changes in EU regulations
Country-specific regulations are not enough – additional challenges for retailers are also provided by EU regulations. The real revolution in the retail industry (but also in other industries) was RODO – the General Data Protection Regulation. Companies operating in the retail area have been required to implement rules regarding the collection and processing of personal data of customers and employees. RODO affected changes in both online and stationary stores – retailers had to make their sales management software compliant with the new regulations.
The retail industry may already be preparing for the next innovations in EU law. In April 2024, legislation was passed on the reduction, reuse and recycling of packaging. Possible changes related to the Omnibus Directive remain an open question, mainly in terms of promotion conditions and duration.
New EU regulations are a challenge for all retailers – including those who operate only in Poland. In the context of international expansion, however, it is worth bearing in mind that member states may enact relevant legislation at different speeds.
Changing regulations – not only an organizational problem
Although the changing regulations are spoken of primarily in terms of organizational and formal challenges, for retailers they are also quite a technological problem. At issue is the sales system and, more specifically, its integration with EU and local regulations.
The sales application should be able to support, among other things:
- Different fiscal systems and VAT rates,
- specific invoice formats,
- reports required by fiscal institutions,
- Pricing and promotional requirements,
- various forms of payment (with a particular focus on local card payment providers),
- complaints,
- e-commerce events in accordance with the country’s rules.
These tasks are difficult to accomplish with outdated IT systems that require new, often very expensive modules, installation and integration. The issue is different with the iXpos system developed by INEOGroup, which provides retailers with access to all functionality at a single price and the flexibility to adapt the technology to current needs resulting from business scaling and international expansion. Check out the details and discover our reatail and e-commerce products.
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Sources:
[1] Polish Economic Institute, Economic Weekly, 34/2024
