Australia’s international retail revolutionOctober 17, 2014 / By
Australia has consistently had a strong business environment, an enviable economic position and exceptionally robust consumer spending trends. But in more recent times, the Australian retail landscape has changed, and international retailer brands have been knocking down the door to get a foothold in the market.
As Cameron Taudevin, JLL’s Australian lead for retail leasing, describes “The industry has always recognised the strong underlying fundamentals of the domestic economy with solid population growth and high levels of discretionary income for many Australians – this is now transitioning into a clear increase in interest and entry activity for many international groups”. As a result there has been an influx of international retailers seeking to capitalise on this opportunity through entering, or expanding their presence within, the Australian market.
Interestingly, the level of competition in the Australian retail market in undergoing a structural change as a result of this influx, with a new model for globally competitive retailing being brought to our shores. Through sophisticated supply chain integration and well-established brands, many international retailers have a significant strategic advantage compared to domestic retailers with regard to price, retail experience, range, quality and speed of bringing new product to market. This strategic advantage and level of consumer demand for such brands is evident in the sales performance of many new international entrants, particularly in the fast fashion market segment.
Fast fashion retailers such as Zara and Topshop have opened to huge receptions across Australia, and have recorded exceptionally strong performance. Zara, for instance, generated $68.0 million from its operations in its first year in 2011. By 2012, sales revenue had increased to $106.8 million with an estimated gross profit margin of 66.7 percent.
“Several weeks ago, Zara opened its first Australian store. 80%, or $1.2 million of stock was sold on the first day of trade.”
The Age, 2011
“Around 250 shoppers … queued up overnight to be the first to get a piece of the Topshop action in Melbourne yesterday.”
The Telegraph, 2011
In addition to Zara and Topshop, retailers such as Forever 21, Uniqlo, H&M and Gap are all at various stages of executing their entry strategies for the Australian market. This week, in fact, has seen H&M and Uniqlo open stores in Sydney, and Forever 21 open its first Australian store on Brisbane’s Queen Street.
As this market continues to gather momentum within Australia, we can expect that the wave of international retailers will continue. In turn, the on-going hunt for adequate space and floorplates in premier locations by these retailers is likely to become even more competitive. Successfully leveraging this demand provides the opportunity to enhance asset values for landlords, and drive the renewal of old and underutilised CBD space in Australia’s capital cities.
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