I talk often about how cultures an iceberg. The things that we know and love about cultures you know, the food, the clothing, the movies. That's all at the top of the iceberg, but there is 90% of culture that is invisible. It's underwater. Hello and welcome back to the Retail Podcast. Today I'm joined by someone who has spent more than 25 years helping some of the world's biggest brands navigating international growth. Today's conversation is about one of the most persistent tensions in international retail. How do you build the scale and consistency of a global brand without becoming irrelevant in the markets you are trying to serve? Katherine Melaquaire Ray has spent more than 25 years working across cultures and categories. With senior roles at businesses including Nike, Louis Vuitton, Gucci, Nordstrom, Hyatt, Shiseido, and Bauble. She now lectures in international marketing and leadership at UC Berkeley Haas School of Business. Her book, written with Natalie Kelly, is Brand Global, Adapt Local. How to build brand value across cultures.
But rather than simply discussing why localization matters, I want to examine the harder executive questions. What should be adapted? Who gets to decide? How much complexity a retailer should accept and whether localization is genuinely creating commercial value. Okay, Katherine, welcome to the Retail Podcast. We're going to just jump straight in. Most international retailers already understand the principle of global consistency and local relevance or they would say they do. Yes. Yet may struggle to actually achieve it. In your opinion, where does it normally break down inside the organization? Is it the strategy? Is it the operating model? Is it the way that they're incentivized? Or is it actually the way that the people are making the decisions? I'm just curious on your thoughts.
So, first of all, thank you very much for having me join you today and I I love the fact that you want to get to some of the more strategic aspects of of this challenge because I think it's something that people hopefully they intuitively know that this is true. The The challenge though is when you put it into prop play. So, we might Let's say most people recognize this and I would argue that's not the case. I think actually a lot of businesses might say that, but they still kind of think "Yes, but we're all really human. We all need the same kinds of things. We're looking for speed, performance, and value." Except for the problem is speed, performance, and value come to life differently for different people. So, human values are universal. We want We all want trust. Can we trust a brand? Do they Are they going to do what they say they're going to do? But how you develop trust means very different things in each culture. So, this is where it's nuanced and I think to answer your question where it breaks down is I think at the very beginning of that conceptual framework.
Oh, interesting. You You introduced the idea of balancing a brand's enduring identity with the needs to evolve it. So, how should an executive team decide what is genuinely non-negotiable in the brand and what can be changed across assortment, pricing, store format, service, and communications? Okay, great. So, let's take So, I've worked for lots of different brands in different sectors from retail, hospitality, beauty, and tech. I ran global marketing of Well, in Japan for Louis Vuitton. Okay, so let's look at Louis Vuitton because you have a brand here that's over 150 years old that is arguably still incredibly relevant and vital today. The largest luxury brand in the world. Louis Vuitton is known for a certain kind of quality, but it's no longer largest selling item is a trunk.
Yeah. [laughter] It was known for building wooden trunks in the late 1800s because that's how people traveled. And I will say most people don't know the story, but the incredible story about Louis Vuitton is is what their innovation was. Do you know what it was? No, I'm telling. Yeah. So young Louis Vuitton was what's called a layetier in French. And it's someone who would fold nobles' dresses and clothes in preparation for a trip. Wouldn't that be nice? It's like a personal valet in many ways. Um your travel valet. The travel valet. Yeah. Yes, exactly. And so you know, he would fill fill fold their petticoats and the chris um crinoline and all of the beautiful fabrics. And yet the problem was they would go on stagecoaches on dusty roads. And so dust would get in over the travel. And he developed a lining to the inside of the trunk that would prevent dust from getting in through the hinges. And that was the original innovation. And that's why everyone started to use their trunks. And people but they couldn't see on the outside. So they would copy them.
They copied the trunks. And so over time they first put it stripes on them to make them different. They started with a gray it's called gray tri trianon. And then they did stripes. And people copied that. And then they did the checkerboard which is now called the damier. So that actually predates the monogram. People still copied it. And so that's when they developed with his son George the monogram. Wow. The monogram was developed in the 1800s as a way to prevent copy copycats. Which now everyone copies. So it's kind of ironic. My point about how they stay relevant is today they don't create wooden trunks, though they do if you want one. That's not their best-selling items, but they still lean into their travel quality and their value and trying to create a holding of items that you can then put in any way you want.
So, the trunks were a holding and then he made things on the inside that allowed you to organize your trunk in the same way that today if you get a Louis Vuitton mall or suitcase, it's basically a shell. It doesn't have lots of separators like some bags do, but it will then know you will sell you other items so that it's up to you on how you want to organize it on the inside. And so, Louis Vuitton has maintained its values about about travel, about quality, about innovation, but it's changed the kinds of products that it that it creates to adapt to time. Who would have known that Louis Vuitton would be creating sneakers? Absolutely. Or men's wear or women's wear, right? I mean, it's so important Or men's wear or women's wear or perfume.
Yeah. I obviously I didn't know the story that you shared, but I went to the Louis Vuitton pop-up in London, which is a hotel, and in the hotel they you reminded me they tell me about they don't tell me the story about like you just explained, but they tell me about the the traveling, right? And how travel is such a big element for them, which now makes so much sense in terms of why they why they've got like floors dedicated to each travel suitcase. And then in in China and Shanghai they've got the massive Voyager boat Louis Vuitton boat that you can, you know, that that that the Louis, which all takes it back to its heritage, which is again the UK and China, two different worlds, same completely different worlds. Exactly. Exactly. And I think Louis Vuitton is a really excellent example of that because the brand remains the same. People all over the world can identify the the monogram and they have they they fully own all of their stores, so they can execute with direct control, which is extremely important. However, in the way they bring service to life or marketing to life, having been head of marketing in Japan for a French brand, it was my relationship with the French team that allowed them to extend a lot of flexibility for how I made the brand relevant at the time. Um and I'll give you another example. Emoji were coming out at the time. We all know emoji today and yet emoji actually came from Japan.
Emo G is emotional character and G is for kanji in Japanese. So, I speak fluent Japanese in addition to French. And so, the emoji were coming out in local phones and I and I was realizing our target audience of young women were communicating with these, you know, and from a western perspective, they still look very juvenile, not serious. But from a Japanese perspective, they were new and innovative and and and I thought we as the leading brand needed to find a way to enter this vernacular, this language. And so, I asked, you can imagine my going up and asking creative directors in Paris, "I want to create an emoji." When they're thinking, "What? Sue the do? No one's doing this." I was like, "No, no, it's not going to be crazy birds twerking about anything.
We're going to do it in brown and gold and just the actual LV logo, probably with a little like it had a little like light reflection on it." It was very clean, it was very classy, but it was stand it was make no mistake about it, it was Louis Vuitton inserting itself in its quality way into a whole new world. And they allowed me to because we had developed trust in that they understood that I understood the brand and the first thing I was going to do is protect it at all cost. I got I would not let anything happen to tarnish this brand. But the second thing that I would do would be pushing the brand as far as the brand could go into new innovation, new worlds, relevance, and modernity because you want when you're competing at that level, you want to be the first.
Good. So I I often say you want to be a half step ahead of culture. Because if you're a full step, you might be a little too far. And I've been known for doing that sometimes, too. You know, no one wants it. So but if you're even a one step behind or a half step behind, you're leaving room for a competitor to sneak in. And you want to be always the first. That's so interesting. I think it's it's so So obviously you mentioned trust the sort of being that anchor that allows you to to sort of to have the license to do things. If you were going to expand that into actual model, whether you call it a governance model or I don't know, a sort of a high level where executives empowers the local teams to have meaningful authority without allowing the brand to to stray away from the brand or the operating model to fragment. I don't know. You've seen what good looks like. Obviously I'm sure you It sounds like you you built that. But can you just give us some sort of thoughts around building these, I guess, ultimately governance models around this?
Sure. Yes. Um and I I actually, you know, I have them I in teaching uh MBA students at Berkeley, I realized people want structure. Yeah. And, you know, marketing is both structure and flexibility. And yet so there is structure and I have some of them in in in my book, but I'll share some of them here. So, the first thing to realize is how do you build trust? It's another one of these wonderfully complex, nuanced ideas. We all want it, but how do you build it? I I figured out a concept of the three qualities that are really required to build trust. And it starts with shared values. That's the first. You have to realize that if you say we're going to be transparent in our communication, you have to both understand what transparent communication looks like. So, you have to kind of go deep. The second part is you have to be able to have open and bilateral communication. You have to be able to communicate back and forth, have dialogues with people because that's how you refine those ideas of the shared values. And the third part is you have to keep your promises. It's built over a history of promises kept. And so, it's like this three-way triangle, shared values, open communication, and a history of promises kept. And if you do all of those, trust develops. And that's why it's the history of of keeping your promises because that builds the trust, but you can't do it without being able to communicate because people, you know, people do things differently and they might make mistakes, but if you have shared values and you can come back to understand what happened, you can clarify those. So, doing that, I said it starts with shared values.
Yeah. How do you get to shared values? This is a whole 'nother concept about culture, which we can go into in a moment, but let me just explain that in order to understand your values, you have to be extremely explicit about them. And we can talk more about that, but your question was how do you be able to sort of honor the brand in a local market? And this is similar to culture, you have to be explicit. What are our brand values? What do we stand for? What are the things that we won't change? And I have a concept called freedom within a frame. Okay. You have to establish your frame. What are the things about our brand that are our frame that won't change that we set at global headquarters, but we know our we don't want to be static. We have to evolve with each market, and that's where you create the freedom. And that freedom you actually want to encourage your local teams to be able to play and invent and innovate as their markets are changing. So, if you have the frame and you hold that firm and it's very clear for both headquarters and local markets what that is, then you want to actually encourage your your teams to be able to lean in to that gray space in the middle of it and um innovate.
Yeah, I I it it's it makes me think about some of the times when I've when when I've been in these situations with the sort of local and sort of global perspective. And one of the things that keeps coming back, and it's all sort of anchored to what you're saying, that ultimately what you're saying sounds expensive. So, a local adaptation and and things sounds right. May it may not be, but local adaptation adds cost, complexity, and execution risk. And I'm curious what your sort of advice, guidance would be for executives who who who's So, how how should leadership look at this and distinguish between adaptation that creates incremental customer and brand value and localization? And so, when when they is it really just organizational preference or do you feel it's sort of like an unnecessary variation? I'm just curious how you would measure and what would make you reverse the decision?
Yeah. Well, I think actually the expense comes in entering markets incorrectly. So, yes, you might say complexity creates cost because you're having to adapt, but actually the larger cost is if you fail to enter a market correctly. And you think that your blind spots make you believe wishful thinking that you can just enter a market in the same way you enter another market to save costs. Yeah. And there are countless examples of brands that have done this wrong. They think they're so big and that if they're successful, huh? And and still doing it. I mean, there's quite a few public cases right now where Exactly. There are lots of cases. I mean, I I I love to talk about Airbnb because I teach at Berkeley. So, you know, I have lots of students who are interested in tech and they all and Airbnb is a fantastic company. Don't get me wrong. I really um appreciate it and I and it's a culture brand. So, I I appreciate the fact that they're really trying to get local. But they speaking of cost, they went into China. They had strategic investors from from China.
Wow. Okay. They um one of the two founders localized, moved to China to be the president. So, they had direct leadership in China. And suffice it to say after 6 years of working in that market, they pulled out. They pulled out because trust isn't transferable. They failed to realize a few different things. They even adapted their logo with Chinese characters. So, you know, freedom letter frame. I'm going to get to this. They failed to recognize the issue of cleaning. Having to clean after um a staying in some stranger's house, the notion of a stranger's place. It wasn't an institution where there was trust. It was various individuals and that unknown of stranger's places was uncomfortable for people. The notion that you had to work really hard and then clean before you leave was very uncomfortable. They didn't trust the reviews of these individual people. And so other companies, it's not that there is no home sharing in China, but local companies did a few things. They created a third-party photographer to shoot to shoot the pictures consistently for all all the different vendors. They created a cleaning they had housekeeping services separate. So they created other ways of verifying listings.
Yeah. Um there was also financial payment questions because they didn't have a credit card system and and they had to be a part of the Chinese payment systems with through Alipay and various things like that. Alibaba's, yes. Yeah. So that is one way where you think even someone like Airbnb which is really a virtual company that should be able to seamlessly work across markets had real issues of culture cultural to the point that they pulled out. And think of six years of investing in China and they pull out. So when someone says to me, you know, oh, it's just too complicated to adapt to various markets and they I say, you know, how expensive is it to make that mistake and then have to all the not only the sunk costs Yeah. doing it wrong, but then the missed opportunities of walking away from potentially lucrative markets.
I got you. When you moving on sort of from the thing but looking at technology in a whole and obviously everyone is obsessed or talks about AI and how AI has made translation, advertising, content creation, ads creation so much cheaper and easier for for corporate marketing teams or central marketing teams to do it with speed and volume. But they're not necessarily the same as cultural relevance, right? So do you feel that AI fundamentally improves the retailer's ability to adapt locally or does it just industrialize superficial localization? Well, the real constraints or what remains around the test of its relevance to retail to retailers in 2026?
Yeah. I I think like most tools, um it it's all about how you use it. There is great opportunity in AI, but one of the things it doesn't get is context. And culture is context, right? I just gave you this example of Airbnb. It's see it There are people traveling. The Chinese are very tech-savvy. You would think that they're they're looking for good quality deals. You would think that those market demands would translate into into very profitable business. But, if you don't know to ask what might be the cultural obstacles in a market here, what How do I create trust in a market of unknowns? And I think that that's one of the challenges because insight doesn't live in the data, it lives in the interpretation of the data. And And this is why it's so important. AI is a great teammate, but it is not a, you know, stand-alone tool, especially in going international because the thing about going international is there's a lot of stuff we can't see. I talk often about how culture is an iceberg. It's an iceberg. So, the things that we know and love about cultures, they're, you know, the food, the clothing, the movies.
That's all at the top of the iceberg, but there is 90% of culture that is invisible. It's underwater. And so, when you're trying to work across culture, one of the things that I say is you need to learn to lower that waterline. You have to expose those hidden assumptions and expectations and cultural values, just like with Airbnb. And so, a human can do this with AI. You can prompt AI to look beyond the obvious issues and help you understand the nuances. If if you've traveled to a foreign culture, if you speak a foreign language, you know that the words don't necessarily mean the same thing. Yeah. You know to look at, you know, who walks into a meeting room first, where do they sit? If you know to look for that, you are reading a lot of communication and relationship building. I'm an American and I come from the country that is least aware of these types of contextualized meanings.
Yeah. We are very transactionally driven. We are looking at the written word, what's in the contract. We are the outlier in that. Yes. Most other countries prioritize relationship building in order to build trust. We prioritize having a contract to build trust. [laughter] And so there that's not that it's one or the other. They're both important, but which one comes first and how do you work on building those three things for trust, shared open communication, history of promises count. So Yeah. in in sum, I love AI, you know, but the the key is that you need to work with humans for flexible mind, an intuitive mind, a sensitive mind to be able to add the framing, the judgment and and ultimately the taste.
I got you. It feels like the next question and and it's my final one. You sort of maybe my penultimate one. That you sort of answered, but if you were going to advise a retail CEO who's entering a new market or he or she was entering a new market next month, what do you believe is that one assumption that you would tell them to challenge before approving investment? I think it is recognizing the limits of our own understanding. Got you. Uh but beyond the things that we know we don't know, I think the biggest obstacles are the things we don't know we don't know. Okay. Right? The things that we don't know we don't know. And so, you this is where communication, connection, relationships, tools come in, both AI and humans. You if you're lucky enough to already have teams in different cultures or even at your headquarters if you have people from different backgrounds, leverage those. Recognize the power in those different perspectives. They diverse teams actually are can be more productive.
They they avoid they challenge one another's blind spots. They become literally smarter if you can ignite the power of that diversity. Yeah. The way to do that again is to lower the waterline, to create trust. And if you do that in your microcosm of a diverse team in your own market, that helps you grow internationally because you do need the relationship between a headquarters and a local team where each one has shared objectives overall to grow the business but different roles to play. The headquarters sets the strategy, the parameters, that framing that we talked about earlier. And the local team needs to be really, really close to the market understanding the brand, the frame, what it can and cannot do, and innovate in the white space within it.
I got you. I know you've Thank you for that. I know you do lots of podcasts, you meet lots of various people, and your students as well. What's the one question I should have asked you that I didn't? Ooh, that's a hard one. I have been asked so many questions. One question a student asked me, the ones that I that I that I would love to know other people's questions too, is it is is quality cultural? Okay. And I said it is. Yeah. I and he is it in Was it Indian student and who said, "No, because something is better. It can be demonstrably better." I said, "Well, that's a technical quality. Technical quality can be measured. How much something can carry, how much something, you know, when it rips." Yeah.
Um emotional quality is cultural. Value is cultural. And the quality of our relationships is emotional and and cultural. And so, I think, you know, that would be one of those very metaphysical questions of is quality emotional? I love it. [laughter] I love it. I love it. And it's a perfect way to end the show. Katherine, thank you so much. If people were interested in finding out more about you, obviously, um the book's available on Amazon and all other major uh book platform. So, you know, go and get go and get your copy. Where else could people sort of reach out to you and keep in touch with you? Well, thanks for asking. Yeah, I mean, I um not my goal is to help other people just understand how to really celebrate the differences of our cultures. Reach out to me on LinkedIn. Um I have a website, too, Katherine Melchiorre.
Uh I'm building my YouTube of the various talks that I've done around the world. So, um it's still in nascent form, but I'm happy to speak with other people and um help them and uh hope that this was inspired lots of new innovation. Absolutely. I mean, I to be honest, there's so many brands I want to talk about, but I I won't cuz I'm conscious of your time. But, and I know that's what the the listeners will be going to I wonder what that means with Nike. I wonder what that means with like all the brands that they've heard that recently have had to I I have lots of stories. If I don't mean to interrupt you, but I have lots of stories. So, again, in the book I open with a story about Nike, but not how they dominated, but actually how they lost number one market share in India of all places. So, you know, like I I talked about Airbnb and Nike. So, I think not only do we talk about successes and there are a lot of them Um and I have examples of them in the in the book, but I also talk about the failures because again, we learned so much to learn how people miss the opportunity to be number one and the huge cost that's associated with making those those mistakes.
Yeah, I love it. Katherine, thank you so much once again. Thanks, Alex.
