International Retailers Australia is Hot Property

COLLIERS INTERNATIONAL | WHITE PAPER
2013
International Retailers
Australia is Hot Property
Growth opportunities for many of the
world’s largest retailers continue to be
driven by global expansion in an attempt
to make-up for slow-growing or stagnant
domestic markets. This desire to expand
globally, combined with the need to
constantly reinvigorate retail precincts
and shopping centres has led to the
current wave of international retailers
coming to Australia. International retailers
can compete aggressively on price, retail
experience, range and quality against
existing local brands. Those international
retailers that have opened here already
are reporting strong initial trading data.
The influx of international brands is
forcing Australian retailers and shopping
centre owners to improve their offer in
order to compete.
While local retailers may feel like they
are being overrun by foreign retailers,
for consumers, it means that brands
that were inaccessible to them unless
travelling overseas or more recently
online, are now opening stores in
Australia. For property owners, this
phenomenon means that international
brands are taking up some of the
space left behind by local retailers
who have failed or undergone network
rationalisations, but it is also creating new
retail environments. The questions are,
why Australia, and why now - will these
brands be successful and what will be
the long-term impact? All this at a time
when some local brands are struggling
in an environment of slower consumer
spending?
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WHY ARE INTERNATIONAL RETAILERS COMING TO AUSTRALIA NOW?
With domestic growth prospects stalling for many retailers in North America and Europe,
the relative strength of the Australian economy has driven many overseas retailers to look
at entering the Australian market. As the only developed country that did not fall into a
recession during the global financial crisis, international retailers are attracted to Australia
by our comparative economic stability, high disposable incomes and western tastes.
Despite an expected slowdown in the mining boom, our economic performance is still
expected to outpace growth in the US and Eurozone. Australia, with its strong fiscal
position and ties to Asia is well positioned to outperform its peers. Strong inbound tourist
numbers from Asia will also support the luxury retail sector. Asia itself is often proving to
be challenging for western brands and Australia appears to be an easier market to enter.
Traditionally, Australia’s opposing seasons to the northern hemisphere and geographical
isolation meant that foreign retailers found it a difficult market to enter. Without this
competition, local retailers were able to keep margins and prices higher than those
overseas. For many international retailers, Australia represents a relatively untapped
market. They favour Australia as they can compete aggressively with local stores on price,
fashion, range, experience and quality. Whilst expectations for retail turnover growth in
Australia are relatively modest, they are still higher than the growth rates anticipated
across North America and Europe. Additionally, by establishing themselves in Australia, it
allows global retailers to use this platform as a springboard into the growth economies
across Asia. To some, Australia’s relatively wealthy Asian ethnic population and high
number of inbound tourist numbers from Asia can provide a litmus test on demand.
Part of the appeal of Australia to international retailers is our propensity to spend. Despite
national household savings rates of around 10%, Australian consumers are quick to take up
new technology, fashions, fads and experiences. As a nation, we aspire to have the latest
and greatest of everything.
The relative economic strength, combined with the high Australian dollar has spurred
demand for international brands online. Australian consumers have become more familiar
with overseas brands and purchasing products from offshore. Global retailers have moved
quickly to capitalise on the growth of online retailing in Australia. US department stores
Nordstrom, Saks Fifth Avenue, Macy’s and Bloomingdale’s all offer shipping to Australia,
and openly consider the market as one of their biggest online customers. Internet sales to
Australia are known to be understated, because many Australians have product delivered
to addresses in the US and Europe for self-collection in some form. Internet only retailers
such as ASOS, Net-a-Porter, and Shopbop also do a very high portion of sales to
Australia. Many other US and UK based brands ship regularly (often free) to Australia. This
has alerted international retailers to the demand from Australia for their product. Retailers
are able to use activity on e-commerce sites to uncover key information on the demand for
product categories and seasonality factors. Testing the market online first enables them to
gather data and get to know the market, this is a significant benefit when setting up
business in Australia, and effectively reduces their local strategy risk. With eighteen out of
the top 20 online retailers in the US backed by a physical store presence, the strategy
becomes increasingly cross-channel. Thus, having tested demand for product and brands
online, the logical next step is to build a bricks-and-mortar presence in Australia.
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is, by global standards, an expensive place to do business. With retail rents in
“These global retailers Australia
Sydney and Melbourne regularly ranked amongst the most expensive in the world, retailers
are very advanced in
terms of vertical
integration, which
means that new
need to have a strong business case for coming to Australia and be positive that product
will sell with good margin. In addition to rent, wages are more expensive and high
transport costs are always a significant factor. Australia has strict safety standards,
quarantine and customs regulations, which can prove problematic for some international
retailers. On the other hand, Australian business is considered to be done professionally
with high integrity and corruption is considered minimal.
products can
reach
consumers
faster, at a
WHICH RETAILERS ARE HERE AND WHO IS COMING?
lower price
point, and more
conveniently.”
Barriers to entry aside, fundamentally, Australian and Asian markets represent growth for
international retailers. While Australia is still considered part of Asia, international retailers
view them as separate, and two very distinct markets. They see opportunity in Australia
based on a demonstrated appetite for other western retailers. While with Asian markets,
particularly China the entry risk is much higher due to vast cultural differences and tastes.
International retailers have a number of potential competitive advantages over local
retailers. Operating globally provides them economies of scale which can be used to bring
products to Australia at reduced prices. These global retailers are very advanced in terms
of vertical integration, which means that new products can reach consumers faster, at a
lower price point, and more conveniently. China and Asia generally are key manufacturing
markets and geographically closer to Australia than retailer’s own domestic markets. In an
area that domestic retailers are often criticised for, the customer service and experience
provided by international retailers is often far superior to the local offering. When
international retailers come to Australia, they view it as a long-term play, happy to ride out
any short-term downturn in retail spending.
The pioneer retailer in this sense was Apple; they introduced flagship retailing to Australia.
They opened their first stand-alone store on George Street in Sydney, in June 2008. Apple
was the first retailer to have such regimented branding requirements in terms of quality,
design and store environment. They have since rolled-out a further 17 stores with
medium-term plans to reach 30 stores in Australia. Apple has proved to be extremely
successful, even with a large flagship.
The latest wave of international retailers to enter Australia began with the high profile
opening of Gap at Chadstone in Melbourne, followed by Zara’s first Australian store at
Westfield Sydney in April 2011. Excitement for international retailers reached fever pitch
with the opening of Topshop in December 2011, at the Jam Factory on Chapel Street in
Melbourne. This was repeated in October 2012 with the opening of the Topshop Sydney
store, on the corner of George and Market Streets. The opening of Topshop in Melbourne
was the brand’s most successful franchise opening after the retailer was able to use data
gathered from online transactions to pinpoint local demand.
While some brands are confident enough to enter the Australian market via their own
freestanding stores, we are seeing a number of international retailers open a retail space
via a store-in-store concept or concession collaborating with department stores. A recent
example of this is UK luxury lingerie brand Agent Provocateur, which has opened a
boutique at David Jones in the Sydney CBD and Bourke Street Mall in Melbourne.
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Whilst not a new concept, this allows the retailer to test the market, and take advantage of
the established customer base of the department store to introduce its brand. The pop-up
store is also another popular option to measure response and demand for a brand. UK
brand Miss Selfridge will open a pop-up store within the Glue Store at Westfield Bondi
Junction, before moving into stand-alone stores.
INTERNATIONAL RETAILERS IN AUSTRALIA
FIRST STORE
OPEN IN
AUSTRALIA
NO. OF
STORES
AVERAGE
STORE SIZE
(sqm)
ESTIMATED
TOTAL SPACE
REQUIREMENT
(sqm)
RETAILER
CATEGORY
COUNTRY
OF ORIGIN
Zara
Fast Fashion
Spain
Apr-11
Westfield Sydney
6
20
1,500
30,000
Topshop/Topman
Fast Fashion
UK
Dec-11
Chapel Street, Melbourne
2
15
1,800
27,000
Miss Selfridge
Fast Fashion
UK
Feb-13
Glue Store, Bondi Junction
1
5
800
4,000
Gap
Apparel
US
Aug-10
Chadstone, Melbourne
3
15
800
12,000
Banana Republic
Apparel
US
n/a
n/a
0
5
1,000
5,000
H&M
Fast Fashion
Sweden
2013
n/a
0
10
2,000
20,000
Abercrombie & Fitch
Apparel
US
n/a
n/a
0
10
1,000
10,000
Hollister
Apparel
US
Apr-13
Westfield Bondi Junction
0
10
750
7,500
Uniqlo
Fast Fashion
Japan
Emporium, Melbourne
0
25
1,600
40,000
J. Crew
Apparel
US
n/a
n/a
0
5
600
3,000
Forever 21
Fast Fashion
US
n/a
n/a
0
5
800
4,000
Williams-Sonoma
Homewares
US
May-13
Bondi Junction
0
10
2,000
20,000
lululemon athletica
Sports Fashion
Canada
Oct-04
Chapel Street, Melbourne
18
30
250
7,500
Point Zero
Fast Fashion
Canada
Mar-13
Rundle Place, Adelaide
0
10
800
8,000
Joshua Perets
Teen Fashion
Canada
Mar-13
Rundle Place, Adelaide
0
10
500
5,000
Le Vie en Rose
Lingerie
Canada
Mar-13
Rundle Place, Adelaide
0
18
500
9,000
River Island
Fashion
UK
n/a
n/a
0
5
1,500
7,500
Next
Fast Fashion
UK
n/a
n/a
0
n/a
n/a
n/a
Victoria’s Secret
Lingerie
US
2010
Sydney International Airport
4
10
200
2,000
Agent Provocateur
Lingerie
UK
Feb-13
David Jones, Sydney
2
10
200
2,000
BeautiFeel
Footware
Israel
Oct-12
Chatswood Chase
3
5
250
1,250
Sephora
Cosmetics
US
n/a
n/a
0
n/a
n/a
n/a
T.M. Lewin
Mens Apparel
UK
Sep-12
King Street, Sydney
1
10
150
1,500
Thomas Pink
Mens Apparel
UK
2013
357 Collins Street, Melbourne
1
5
150
750
Muji
Apparel/
Homewares
Japan
n/a
n/a
0
10
750
7,500
Marimekko
Apparel/
Homewares
Finland
Early 2013
66 King Street, Sydney
2
5
250
1,250
Apple
Consumer
Electronics
US
Jun-08
George Street, Sydney
18
30
500
15,000
Samsung
Consumer
Electronics
South Korea
Aug-12
George Street, Sydney
1
5
400
2,000
2013
FIRST LOCATION
IN AUSTRALIA
NO. OF
STORES
PLANNED
Source: Colliers International Research
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“Whilst there has not
been a rush of
retailers from Asia
yet, there are a
number looking
around, and we
expect they
will make-up
much of the
next wave of
retailers to target
Australia.”
US lingerie and brand Victoria’s Secret has taken a different tack, opening stores in
Australia located only within airport terminals. The brand currently operates four stores via
licence in both the domestic and international terminals at Sydney and Melbourne airports.
In the luxury segment, we have seen a number of brands open flagship stores over the
past 12 months including Burberry and Louis Vuitton. In January, Dior opened their first
flagship store on Castlereagh Street in the Sydney CBD. Luxury brands have also been
expanding into markets outside of Sydney and Melbourne across Australia; we are starting
to see them go into Perth and notably Brisbane. The Brisbane market has had a number of
luxury retailers open along Edward Street including Zegna. Other brands with stores under
construction in this precinct are Gucci and Longines.
Currently under construction at Bondi Junction in Sydney is the first owner-operated store
outside North America for US furniture and homewares brand Williams-Sonoma, as part
of its overall global expansion strategy. Their products are represented through seven
distinct merchandise strategies, four of which they will open in Australia: Williams-Sonoma
(cookware and wedding registry), Pottery Barn (furniture and bridal registry), Pottery Barn
Kids (kids’ furniture and baby registry), and West Elm (modern furniture and room decor).
Another high profile retailer confirmed and actively looking for locations in Australia is
Abercrombie & Fitch from the US, whose brand Hollister is set to open during the second
quarter of 2013 at Westfield Bondi Junction. A number of retailers from Canada have also
confirmed their arrival in Australia during 2013. Fast fashion retailer Point Zero and youth
fashion brand Joshua Perets, along with lingerie retailer Le Vie en Rose will all open stores
in March this year at Rundle Place in Adelaide. On the back of strong online sales to
Australia, US retailers J.Crew and Forever 21 are also understood to be looking for suitable
locations. Cosmetics and skincare retailer Sephora (which is owned by France’s LVMH) is
rumoured to be looking at Australia, and US electric car retailer Tesla is also active.
Sweden’s H&M has long rumoured to be looking at Australia, and is expected to open
flagship stores later this year in Sydney and Melbourne. H&M has more than 2,800 stores
in 48 countries, it operates other brands include the higher-priced COS and urban fashion
labels such as Monki, Weekday and Cheap Monday. The company opened 304 new stores
worldwide during 2012, and plans to add 325 more this year, with the fastest rate of
expansion in China and the US.
Whilst there has not been a rush of retailers from Asia yet, there are a number looking
around, and we expect they will make-up much of the next wave of retailers to target
Australia. Japanese retailer Uniqlo has confirmed it is close to committing to a number of
locations in Australia with a likely first site in Emporium in Melbourne. Typical store size
for Uniqlo is between 1,000 and 5,000sq m, with stores in Australia expected to be around
1,600sq m. They are understood to be initially targeting around 25 stores in Australia, and
once flagship locations are secured, will look further afield to regional and sub-regional
centre locations.
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In the grocery sector, US discount retailer Costco has been steadily growing its business
and customer base since its first store at Docklands in Melbourne opened in 2009. It
currently operates three warehouse stores in Australia, with a further three under
construction or waiting planning approval. International retailers coming to Australia are by
no means limited to the apparel and fashion sectors, with the likes of IKEA, ALDI and
Costco already well-established and apparently performing strongly. We anticipate
increased demand from other retail sectors; in the furniture and homewares category, it
was recently announced that German retailer POCO is coming to Australia. The brand will
open its first 6,000sq m store at the Blacktown Mega Centre in Sydney during Q1 2013.
Finnish fashion and homewares brand Marimekko has also announced two store openings
in Australia on King Street in the Sydney CBD and on Chapel Street in Melbourne.
So far, so good, for all the brands entering with great sales success. However, evidence
from Asia would suggest that some international brands are not performing so well upon
entering those markets. Property owners would be advised to really understand incoming
brands and take a view on their success in Australia and specific locations.
WHERE THE RETAILERS COMING FROM, AND WHAT ARE THEY
LOOKING FOR?
Research by Colliers International has identified 28 international retailers who are actively
looking for sites in Australia or are already in the process of rolling-out stores locally. Of
these retailers, the largest group is from the US, which represents 38% of retailers
identified. Brands from the UK are the next largest group comprising 22%, followed by
Canada (13%), Sweden and Japan both with 6%. We have excluded luxury brands from
this analysis, as despite there being an increasing numbers of these retailers coming to
Australia; demand from this sector is smaller and more concentrated. In most instances,
luxury retailers will open one or two flagship stores in capital city CBD locations only.
Although, there is some focus from luxury brands on increasing store size in Melbourne.
With Oroton being the only true domestic luxury brand competing in this category, impact
on the local market is considered negligible. We have also omitted big box users such as
IKEA, Costco, POCO and Tesla from out analysis as their location and space requirements
are vastly different to other international retailers.
Based on a medium-term outlook of say five years, we anticipate the retailers identified
will require approximately 235 stores, equating to additional demand of around 220,000sq
m. Of the retailers identified, 62 stores have already been opened, the bulk being made up
of Apple stores and Lululemon Athletic, both already established players in the local
market. Take-up of space so far, from the latest wave of international retailers has totalled
approximately 32,500sq m.
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INTERNATIONAL RETAILER COUNTRY OF ORIGIN
US 38%
UK 22%
Canada 13%
Finland 3%
Sweden 6%
Germany 3%
South Korea 3%
Spain 3%
Japan 6%
Israel 3%
Source: Colliers International Research
Of stores already opened in Australia, there appears to be an even split between high
Street and shopping centre locations, with Sydney and Melbourne the preferred markets.
The average store size requirement of the retailers identified is approximately 800sq m,
and ranges between 150sq m and 2,000sq m. The retailers identified aim to open a
minimum of five stores, with the majority looking for 10 stores in the medium-term.
Retailers expected to rollout larger store portfolios include Topshop/Topman (15), Gap (15),
Le Vie en Rose (18), Zara (20), Uniqlo (25), with Apple and Lululemon Athletica both
expected to reach around 30 stores each.
The majority of international retailers entering Australia come from the fast fashion and
general apparel sectors. Australian consumers appear to have a strong appetite for fast
fashion. Whilst most of the major chains are already here or on the way, we do not expect
many more large retailers to come to Australia. We may start to see more experienced,
specialist retailers coming in, and certainly higher end fashion retailers, particularly the
niche fashion retailers from Europe and US. It remains to be seen if the Australian taste is
sophisticated enough to embrace them.
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WHERE ARE INTERNATIONAL RETAILERS LOCATING?
Generally, international retailers upon entry to the Australian market seek a flagship store
in either the Sydney or Melbourne CBD, followed by smaller stores in top performing
regional shopping centres. There has also been strong interest in traditional fashion
forward locations such as Chapel Street in Melbourne. The retailers typically require large
floor plates, with their average store size substantially larger than those of local retailers.
Premier corridors in Australian CBDs still lack sufficient freestanding space to
accommodate the larger footprints and quality streetscape sought by many international
brands. For this reason, new-to-market retailers will also consider options outside of the
CBDs. Space is relatively tight in suburban centres, but with the demise of brands such as
Borders and other domestic retailers; opportunities for reconfiguration in centres have
opened up. For example, Zara opened in the old Borders’ space at Westfield Bondi
Junction. Some brands with larger expansion plans will consider locating in sub-regional
centres once their initial store rollout is complete.
This puts department stores and local fashion specialty retailers at the greatest risk of
losing market share. Particularly vulnerable are low-to-medium price point domestic fast
fashion retailers. The store rollout strategy varies between international retailers, but given
the logistics challenges, generally they come with the preliminary idea of two to three
stores a year, during the initial phase. Medium term, the majority of international retailers
Colliers’ identified, plan to open between ten and fifteen stores.
The more conservative a retailer is, the more they tend to favour locating in shopping
centres given the exposure, higher foot traffic and sale productivity. In most cases this is a
difficult task given current issues with ceiling heights, and the availability of contiguous
floor space in existing centres. They will often have strict requirements as to where in a
centre they can be positioned and the calibre of surrounding tenancies. A number of our
major property owners have been working closely with international retailers to overcome
these issues and accommodate their tenancy requirements.
Hollister store under construction at Westfield Bondi Junction, scheduled to open during the
second quarter of 2013.
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BARGAINING POWER OF INTERNATIONAL RETAILERS
The sophistication and bargaining power of these international retailers often means they
pay less or will seek to pay less rent per square meter for the quality of space they occupy,
and tend to commit to longer lease terms than local retailers. The space requirements of
these retailers mean that in most cases they can only enter an existing shopping centre
when it is refurbished or expanded. The criticism often levelled at centre owners by other
tenants is that the rent of international retailers is being subsidised by other local retailers.
Due to the high levels of capital invested and the quality of fitout they require (particularly
the luxury brands), international retailers tend to want longer lease terms. Whether a
turnover provision applies will vary between retailers; but we are increasingly seeing a
variety of hybrid turnover provisions in leases.
One theory suggests that having an exciting new international brand will draw increased
foot traffic to a centre so all tenants will benefit. Effectively, these retailers have the pull to
act as mini-majors within shopping centres. Although, not all strong performing retailers
are traffic generators. The three strongest retailers in North America by sales per square
metre are Apple, Tiffany and Lululemon Athletica. Both Apple and Lululemon Athletica
have shown that they can generate traffic, but Tiffany is not an acknowledged traffic
generator, so even though they do great turnover, their presence in a location does not
produce additional foot traffic. The international retailers also argue that they generate
good quality, high spending traffic – this is often a subjective topic.
Ultimately, if a brand demonstrates that it is capable of generating traffic, landlords will
want them in their centres, and if necessary give them more favourable terms than other
tenants. However, this theory applies equally to local retailers such as the supermarket
chains and department stores (although the latter category is waning in influence locally
and globally).
Topshop/Topman store on the corner of Market and George Street, Sydney CBD opened October
2012. The 1,800sq m store spans four levels in the heritage-listed Gowings Building.
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WHAT DOES IT MEAN FOR AUSTRALIAN RETAILERS?
The entry of foreign retailers is a major challenge for the local market. With the number of
international entrants to our market increasing, it raises the competitive bar for domestic
retailers that have previously faced only modest competition. This should result in an
improvement in customer service and the in-store experience from domestic retailers
whilst also spurring further sector consolidation.
International brands will inevitably attract shoppers to CBDs and regional shopping centres
increasing foot traffic and sales. There are concerns that it will be the smaller, local fashion
retailers that will bear the brunt of this competition with their turnover and market share at
risk. Australian retailers need to ensure that their response to international competition is
positive and that it forms part of a longer-term strategy.
The table below categorises the international retailers already here or that we have
identified coming to Australia based on market segment. We have also listed the Australian
retailers that we believe will be impacted by the arrival of these international retailers.
RETAIL CATEGORY
ESTABLISHED MARKET
LOCAL RETAILERS
COMPETITION
INTERNATIONAL RETAILERS
Fast Fashion - Low Price
Point
Supre, Valley Girl, Dotti,
Bardot, Jay Jays, Cotton On,
Just Jeans, Jeanswest
H&M, Uniqlo, River Island,
Next, Point Zero
Fast Fashion - Medium Price
Point
Sportsgirl, Witchery, Country
Road, Portmans, Forever
New, Industrie
Zara, Topshop, Forever 21,
Gap, Abercrombie & Fitch,
Hollister
Fashion - Mainstream
Cue, Marcs, David Lawrence,
SABA, Sportscraft, Alannah
Hill, Rhodes & Beckett
J.Crew, Banana Republic,
lululemon athletica,
T.M.Lewin, Thomas Pink
Those retailers at greater risk are generally the small to medium sized private retailers,
rather than the well-resourced larger or listed companies. Local players operating in the
same space as these international retailers will not only need to ensure their product range
reflects the latest trends, but that they can be easily distinguished from the competition.
Given the tight retail market conditions, the battle for market share will intensify. In addition
to competition for customers, international retailers are also tapping into the pool of local
retail staff. Retailers will need to differentiate themselves to drive growth. In response our
more dynamic local retailers have revitalised their product range and placing more
emphasis on their Australian heritage.
The arrival of the new wave of international retailers has helped our local shopping options
and experience evolve to mirror those available overseas. Local retailers do have some
advantages over competition from overseas – they have greater knowledge of the local
market and preferences, an established customer base, and for now, prime store locations.
Depending on how successful these international retailers are, it is hard to deny they will
not be taking some market share and dollars away from domestic retailers. Without
question, the latest wave of global retailers has and will continue to increase competition.
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WHAT DOES IT MEAN FOR PROPERTY OWNERS?
For shopping centre owners the expectation is that having global brands in their centres
will boost foot traffic, sales and consequently leasing demand across the entire centre. The
entrance of international retailer has meant that for property owners, there is increased
opportunity for them to remix their centres. It also drives property owners to be more
sophisticated, as they have additional tenant and brand options when doing lease plans and
positioning their centres. As noted earlier, these international brands are sophisticated
operators, and often challenging to negotiate with. If they do not like a location, they won’t
necessarily be forced to go there. For many global retailers, Australia is still a nice-to-have,
rather than must-have location. While China on the other hand, is becoming a must-have
market. Therefore, if retailers don’t like a site or they are unhappy with the terms on offer,
then chances are they won’t do the deal.
Despite vacancy levels at strong performing shopping centres being negligible, rental
growth has been weak, and the pool of domestic retailers to take the place of departing
tenants has been diminishing. Overall, we anticipate demand from international retailers to
offset local retail failures and store closures at strong performing, high quality retail
locations. With a number of large shopping centre developments and expansions underway
across the country, it provides the perfect opportunity for international brands to secure
the flagship locations they desire. This reshuffle, while beneficial for property owners, will
put pressure on existing retailers. As demand from international retailers is likely to centre
on major CBDs and large regional shopping centres, we expect that the major listed retail
property owners will benefit most.
The combination of retail tenancies and precincts within shopping centres is constantly
evolving; the entrance of international retailers has accelerated the pace of this. While
sometimes initially less lucrative for property owners, having international retailers located in
their centres improves the competitive tension for space, particularly in high quality assets.
Zara store located in Westfield Bondi Junction, occupying the former Borders space. Opened in
September 2012, it is the fifth Zara store in Australia and comprises 1,100sq m.
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OUTLOOK
The influx of overseas retailers to Australian is anticipated to continue and increase. We
expect the wave of international retailers coming to Australia to endure on the back of
strong demand from consumers who are increasingly exposed to these brands through
overseas travel. The rise of online shopping has made brands and ranges far more
accessible. The charge is being led by US brands, but retailers from Europe and
increasingly Asia are looking to expand into Australia. We anticipate another wave of
retailers to come from Japan, Korea and China. For retailers from Asia, who have reached
a saturation point in their home markets, the Australian market is the logical next step for
regional expansion. Chinese retailers will further assert their dominance in the Australian
market, with numerous groups looking to open stores here.
Continuing expansion is the key to growth for these larger global retailers that thrive on
economies of scale. These retailers put plans in place years in advance of their actual
opening, and are more concerned with securing the right site for the long-term rather than
short-term fluctuations in consumer behaviour. Although, experience and history tells us
that not all international retailers entering the Australian market will be successful. Initial
sales reports have been positive, but as competition intensifies, we expect that not all
global brands will prosper in Australian.
International retailers are getting smarter about operating in different geographies and can
now overcome many of the logistical and seasonal challenges of bringing product to market
in different time and season zones. There is strong interest in Australia from international
retailers, but it will take several years for these brands to complete their rollout of stores
locally. This is partly due to their initial focus and priority being the higher growth Asian
markets, coupled with the difficulty in securing sufficiently large and suitable sites.
PRINCIPAL AUTHOR:
Nora Farren
Director | Research
TEL
+61 2 9257 0289
EMAIL [email protected]
As well as overseas retailers coming to Australia, we are starting to see domestic retailers
looking to expand offshore. Faced with limited sales growth in Australia, local retailers are
looking for opportunities in growth markets offshore, particularly in Asia. Brands such as
Cotton On, Seed, Pie Face, Gelatissimo, Jones the Grocer, Peter Alexander, Smiggle, and
Oroton have all recently opened stores outside of Australia - we anticipate this trend to
also continue in 2013 and beyond. The good news is that all these brands are finding
significant success in overseas markets and are generally expanding rapidly.
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