Eli Greenblat
March 9, 2012
The Age
THEY strut the world stage as only multibillionaires can. They own global retail brands such as Ikea, Zara, Aldi and L’Oreal and increasingly Australia is appearing on their radar as a place to do business.
In the midst of what is a challenging retail environment, Scandinavian flat-pack furniture shop Ikea, owned by Ingvar Kamprad the world’s fourth richest man (valued at $US42.4 billion), last year opened a 36,000-square-metre monster in Melbourne and followed that up with another store in Sydney.
Zara, owned by Amancio Ortega, the world’s seventh richest man according to Bloomberg with wealth of $US38 billion, is already here and is threatening to roll out more stores as they are rushed by happy customers.
Interest in the Australian market from these well-known brands and fashion houses has been intensifying over the last year, driven by a number of ”push” and ”pull” factors, with the owners of these businesses opening bricks-and-mortar stores in shopping centres as well as using new locally focused websites to lure us online.
Troubled economies in Europe and North America have forced many foreign retailers to seek premium growth rates outside their home regions with the Australian economy still strong in comparison to basket cases such as Spain, Greece, Britain and parts of America.
The high Australian dollar is also a siren song, making offshore purchases dominated in US dollars all that more cheap for local shoppers who know their prices.
Fashion brands such as H&M, Uniqlo, J. Crew, Abercrombie & Fitch, Banana Republic, Sephora, Victoria’s Secret and Forever 21 are reportedly considering the Australian market. Canadian fitness outfitter Lululemon Athletica has also pushed the button on an accelerated rollout here.
And it’s not just clothing and merchandise. American ice-cream chain Ben & Jerry’s this week unveiled plans to roll out 30 franchise stores in Australia. But all have one thing in common; they are brands well known to Australians despite many of them never having a bricks-and-mortar shop in the country. Before any advertising money is spent, before ads are booked people recognise the brand.
”The brand is loved over here already,” said Johnny Hammond, brand manager for Ben & Jerry’s, ”so before we launched in the Australian market we had Facebook pages, etc, designated to bringing Ben & Jerry’s to Australia.
”I think Australians are travellers by nature and a lot of them have been to Europe or America, have tried the brand and loved it and wanted it here ever since.”
Commonwealth Bank research estimates the Australian apparel and footwear market to be worth $26.5 billion with the slew of new international retail entrants (ex-online stores) to only take 1.7 per cent of the retail sub-sector by 2017. It tips annual revenue growth captured by the new entrants to peak at 8.4 per cent.
”For the retail apparel sector as a whole, our analysis suggests the financial impact is likely to be relatively benign,” said CBA analyst Andrew McLennan.
”In some circumstances, this new competition may be the final nail in the coffin for the odd retailer already suffering from the weak consumer environment.”
However, new retailers won’t have it all their own way, and Mr McLennan says they face challenges such as seasonal timing for fashion, large upfront costs to establish in Australia, higher minimum wages compared with the US and securing leases in A-grade shopping centres.
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