Shopping the World

As Developers Diversified's executive vice president of international, Richard Brown has overseen the Beachwood-based shopping-center developer's recent forays into foreign markets such as Canada, Brazil and Russia. In this excerpted interview with IB, Brown warns that American companies need to be aware of the cultural differences when expanding overseas.

What do U.S. developers have to keep in mind when entering foreign markets?
The old adage says real estate is a local business, and it's important to have people on the ground who really understand the marketplace. We have local partners that we rely on very heavily to do a lot of the day-to-day operational activities. It's virtually impossible for us to know all these markets as intimately as necessary to do real estate developments. There's obviously a lot of cultural issues that we have to be aware of, and it's important for a local partner to really understand people's shopping habits, their taste levels.

How do shopping habits differ from each country?
Let's take Brazil for example. Shopping is first and foremost a social activity. You generate a tremendous amount of traffic from people coming to the mall because they want to hang out there. They don't necessarily shop as much as we may here because they don't have the same levels of income. So if you analyze that, of course food courts are very important there because it's a relatively low-cost way for people to entertain themselves; movie theaters are a great adjunct to that.

Easiest market to enter? Most challenging?
I think we found Brazil quite easy to go into. There's a lot of similar understanding in Brazil of the way business should work. 
I think some of the more challenging markets to get into are places where we are not yet, such as China and India. There are certain government restrictions and regulations in these countries that make it more difficult to enter, like restriction of foreign direct investments, in either getting your money in or out of the country.