While the pace of international growth has slowed over the last few years, retailers continue to expand their networks internationally highlighting the importance of cross-border growth in 2013. Retailers such as Michael Kors, VF Corporation and Nike among others, continued to expand their global networks in 2013 and this trend is set to continue in 2014. CBRE has once again examined the store expansion plans of international retailers. In this – the fifth edition– we have extended the scope of the survey to address retailers’ global expansion strategies. More than 130 retailers, based in Europe, the Americas and Asia Pacific were surveyed to explore the number of stores they are looking to open and the markets being targeted in 2014. We also asked retailers about their plans to enhance their online transactional capabilities.
The retailer responses revealed a renewed confidence in the global retail market with large scale expansion plans firmly back on the agenda. Over a third of the retailers surveyed were looking to open more than 40 stores. In contrast, just 13% of retailers have modest expansion plans - looking to open between 1-4 stores this year. Of the retailers looking to open more than 40 stores in 2014, Mid-Range Fashion and Value Fashion are the most active sectors, accounting for one third (17% each). Coffee & Restaurants retailers (13%) and Health & Beauty retailers (13%) also have ambitious expansion plans. The projected increase in store expansion activity reflects an upturn in consumer confidence at a global level. According to Nielsen, global consumer confidence improved by 3% in 2013, with growth of 3% in Europe, 4% in Asia Pacific and 6% in North America.
Differences by region of origin
Retailers originating from the Americas have large scale expansion plans (see Figure 2) – almost half are looking to open more than 40 stores and another 11% are planning to open between 31-40 stores. Due to the maturity and saturation of their domestic markets, many retailers originating from the Americas, particularly those based in the U.S., are seeking to grow their businesses in markets outside of their own region, providing the opportunity to expand on a large scale. Equally however, improving consumer sentiment in the U.S. is also creating opportunities for retailers to grow store networks in their home market. Retailers from Asia Pacific, on the other hand, have more modest expansion plans - 29% plan to open less than five stores and a further 26% are looking to open between 5-10 stores.
Lacking the same scale and supply network as other international retailers, retailers from Asia Pacific have generally been more cautious in broadening their presence outside of their home markets. Most retailers active within the region tend to focus operations within a few countries, and locations are generally limited to the key or top tier cities where quality retail space is accessible. High rental levels, rising labour costs, decelerating economic growth and slowing retail sales growth in most markets has dampened retailers’ ambition for expansion in the near future.
Retailers are targeting a wide range of markets in 2014 - close to 60 markets globally - however only a fifth of these markets are being targeted by 15% or more of retailers. Germany is by far the most sought after market - 40% of retailers are looking to open stores there in 2014. Among European based retailers, this figure is high at 70%. It is also notable that Germany is the second most important target for American retailers in 2014. Germany’s growing appeal to international retailers reflects the strength of its consumer economy; the relative under representation of international retailers compared with similar sized cities elsewhere in Europe; and the opportunity for retailers to target 20 large cities, including five tier 1 cities, in one market.
France is the next most sought after market with 26% of the survey retailers looking to open stores there in 2014. A number of international brands opened in France for the first time in 2013, including Monki and Primark, with Primark now planning to expand further throughout France. The UK, Austria and China make up the remainder of the ‘top five’ target markets. In Austria unemployment levels are low and GDP
per capita high, making it an attractive location for expanding retailers, particularly for those already looking at Germany as Austria is considered to be the next logical step – half (49%) of the retailers targeting Germany are also targeting Austria. Luxury brands have been particularly active in recent years with a comprehensive luxury offer now present in Vienna.
The U.S. is the top target for retailers in The Americas, but it is ranked down in 13th place in the global ranking with just 14% of the survey retailers looking to expand there. The U.S. remains a challenging proposition for many European and Asian retailers, many of whom are put off by the perception of a highly mature market with strong domestic competition. As a consequence, these retailers are prioritising markets in Europe and Asia over the U.S. Despite this, a number of retailers still have the U.S. in their sights for 2014 and will be encouraged by the in-roads made by brands such as Zadig & Voltaire, UNIQLO and TopShop in recent years.
While the target market ranking for 2014 is dominated by countries with mature retail sectors, a number of emerging markets also feature strongly. China leads the way (a target for 22% of the survey retailers), with 10% or more looking at Turkey, Russia, Vietnam, Singapore and Malaysia.