Globalisation, technology, and demographic change have impacted the business of retail vibrantly. Retailers are trying to expand their brand market share beyond their domestic region. Through continuous development and renovation of shopping centres has created an ideal environment for the retailers who wish to expand their brand visibility around the world.

The latest report by global property advisor CBRE, How Global is the Business of Retail? reports that US retailers were most active in 2014 with 26 per cent share when analysing the percentage of retailers expanding from an individual country. Other countries that followed US were Italy with 14 per cent, UK with 11 per cent, France with 10 per cent and Spain 6 per cent.

Top target markets for new entrants

While considering the overall sectorwise expansion, mid-range fashion retailers were most active globally. Tokyo, topped target market in 2014 for new retailer expansion in the world drawing 63 new retails brands. Singapore comes second with 58 new retail brands while Taipei is fourth. Other top fifteen markets are Hong Kong with 45 new entrants, Beijing with 34 and Manila with 24. Whereas, London has maintained its position of being worlds most preferred shopping destination with the existence of 57.9 per cent of international retailers there. Dubai and Shanghai are closely following with 55.7 per cent and 53.4 per cent respectively.

The desire for expansion into new cities by international brands is rising. According to Manish Kashyap, Regional Managing Director, Head of Brokerage Services, CBRE Asia Pacific, said, retailer globalisation continued in 2014 as retail brands targeted a wide range of locations across the world. Not surprisingly, Asia features heavily on the list of target cities of new retailer entrants with six out of the 15 cities from the region. The luxury and business fashion sector in particular contributed more than a significant portion of the new retail entrants to the region; however, this was mostly second-tier brands as mainstream brands are already well-established.

The core elements of globalization, technology and demographic change are continuing to have a dramatic impact on the retail business, encouraging global retail expansion. As retailers look to drive market share and raise their brand profile, they will continue to expand and look for opportunities beyond their home territories. We are seeing more brands open in diverse locations such as Taipei and Manila. Even though China is seeing a slowdown of demand from retailers to expand, the growth of consumer spending power of this market means it is hard for brands to resist entry for much longer.

Retailers from EMEA (Europe, Middle East and Africa) and Asia Pacific see a significant growth opportunity within their own regions. The target regions of EMEA retailers are Europe (51 per cent), Asia (29 per cent), Middle East and Africa (11 per cent), while Americas retailers are targeting on Asia (41 per cent), Europe (33 per cent), Middle East and Africa (12 per cent). At the same time Asia Pacific retailers focus on expansion in Asia (79 per cent) and European regions (12 per cent).

South Africa in focus

Globally, South Africa ranked 15th among the most targeted countries with 19 new brands entering in 2014. Since past few years famous brands like Cotton On, Zara, Gap, Mango, Forever New have arrived in the retail market of South Africa; international retailers are showing interest in the South African retail market. In recent years an increased penetration of international brands such as Topshop, H&M, Victoria's Secret, Forever 21 etc. has been noticed in the retail market.

Usually entry into the market is done through a franchise local partner who allows them to operate exclusively in South Africa. This is because the local partner will have better understanding of the retail site and hence risk associated with the retailer is reduced. However, not all the international brands have entered the South African retail market through franchise partner. The brands like Zara, Cotton On, Forever 21 and H&M have directly entered the retail market of South Africa. The Mall of Africa that will open in April 2016 is an example that has attracted several international retail brands and will definitely become an attractive destination for the consumers.

 

Luxury and business fashion retailers

 

In 2014, the luxury and business fashion sector accounted for more than one-fifth of the new retail entrants to Asia Pacific region. However, the new entrants were mostly second tier luxury brands. The statistics available from Global Blue states, Chinese tourists spending on luxury goods in Europe had increased by 18 per cent in 2014 and it rose to 67 per cent in the first quarter of 2015. Luxury brands like Chanel, Cartier and Patek Philippe have cut down the prices or planning to cut down their prices in Asia. Chinese shoppers are looking for something different and individualistic as traditional big brands have become common. Thus, a trend has come up with motivating fashion brands which offer branded products at affordable prices.

 

On the other hand, more luxury brands have prospered in Japan and Australia. Some of the department stores have planned to move out and open their first individual stores. Important cities like Sydney, Tokyo and Melbourne have become very popular. Latest CBREs report states that 85 per cent of luxury and business fashion retailers are looking at Asia Pacific region for their expansion. However, the retailers will adopt a vigilant attitude towards expansion as the operating costs are on a rise.

 

Middle East focusing on Abu Dhabi and Dubai shows no sign of dwindling. The atmosphere for expansion remains attractive as it has some of the biggest shopping malls on earth. Similarly, the growing customer craving in Asia indicates no sign of fading, while there is a slowdown to some extent to expand in China. The year 2015-16 could be the time when the international retailers would further explore the African markets. Although South Africa is well-established, it still has the room to grow further. Kenya, Nigeria, Ethiopia all offer prospects to retailers to find the right partners and target the customers of each market. It is already anticipated that in 2015 the retailers continuing with their expansion plans will establish more stores in new cities and continue its growth in terms of number of stores in each market.

 

Retail has rightly gone global and 2015-16 will only witness its further development.

 

Reference:

Cbre.com