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Global Report: Australia

The harsh economic climate may have led to domestic Australian retailers scaling back, but international
chains are migrating Down Under, with many new names plotting an Aussie adventure.

Last month, Swedish retail giant H&M became the latest to announce its launch in the country. The retailer declined to reveal further details, but it plans to open its first shop in Australia in 2014 and is looking at a range of different cities.

H&M joins the likes of Zara, Topshop, Reiss and Asos, which have all expanded Down Under, taking advantage of the business-friendly environment.Franchising is one of the most popular routes to market as UK retailers opt to work with regional partners to gain local knowledge.

Arcadia, which has launched three Topshop franchises in the last couple of years, has had huge success in Australia and is planning to open further Topshop stores as well as plotting the debut of Miss Selfridge in the region.

“I have to say overall for us the Australian business is really strong, it’s really fantastic,” says Arcadia international director Paul Gould.

“I think they’ve been starved of Western product for a long time. It’s an island that is a long way away so for a long time they haven’t had that Western product and so there was definitely pent-up demand.”

Gould adds that Australian consumers are similar to those in the UK and so product does not have to undergo much change as they “just get” the fashion there. Many Australian shoppers’ lifestyles are focused more on the outdoors than UK consumers and so leisure and sportswear could prove popular for retailers in the country.

The key issue with UK retailers expanding into Australia is seasonality.

“When we’ve got Christmas snowflakes they’ve got 40-degree heat,” says Gould.

“But we’ve always felt that 80% of our product range was absolutely right. If you take Topshop, it’s all about the latest trends and the latest fashion and that’s always absolutely right irrespective of what season it is. So we’ve just tweaked parts of the range to react to the counter-seasonality.”

There are further challenges involved when expanding in Australia, says Kelvin Mason, executive director of global logistics company Kerry Logistics.

“Australia has quite advanced infrastructure with the greatest challenge being the small population and long distances in between major population centres,” he says.

“With a strong Australian dollar, high wages and expensive domestic transport costs, the less handling and internal transport done in Australia the lower the [cost of] the supply chain model,” adds Mason.

Retailers have therefore traditionally operated a central distribution centre and delivered product to stores by road from this centre.

Due to the huge expanse of the country, it can take consumers many hours to travel between shopping areas, which is just one of the factors that has helped with online expansion.

Etailer Asos launched online in Australia in 2011 and has since recorded strong sales in the region, capitalising on its strong ecommerce culture.

Zia Daniell Wigder, analyst at global research and advisory firm Forrester, says Australian online shoppers tend to “spend lavishly”.

“In Australia, average spending per online buyer remains incredibly high at more than AUS$2,000 [£1,374] per year,” says Wigder. “A large percentage of Australian online shoppers spend their dollars on overseas websites.”

Wigder adds that a recent study found that half of the online department store retailers Australians visit are based outside Australia, while 31 of the top 100 clothing and accessories websites are also based abroad.

Richard F Wolff, director of international at multichannel consultancy Javelin Group, explains one of the reasons why UK retailers have scored online sales successes from Australia. “There is a certain amount of product [AUS$1,000] people can buy online where they don’t have to pay tax and when you include the exchange rate it
can prove quite profitable for the Australian consumer. As a result, there is some evidence of bricks-and-mortar stores having a harder time.”

However, for retailers wanting to open bricks-and-mortar stores in the country there is an abundance of space available. “It has a massive ratio of density mall space per head,” says Jonathan De Mello, senior director at real estate adviser CBRE.

“Australia is only behind the US for density of mall space per head, and it’s four times that of the UK.”

There are a number of developers such as Westfield and Lend Lease that have a strong legacy in the country and offer a range of retail options, but with such great choice comes stiff competition from neighbouring retailers.

Yet the shared language, similar culture and customs will make Australia an attractive prospect for many UK retailers over the coming years. Additionally, its proximity to the Asia Pacific region makes it both easier and cheaper for sourcing from the Far East and means Australia can offer a gateway for those looking to launch
further afield.

Carly Hunter

Carly Hunter

Carly Hunter

Melbourne designer Carly Hunter’s label is Australia through and through. Hunter hails from Perth, studied fashion in her hometown and all her production is based Down Under.

Unlike a lot of her peers in Australia, since launching in 2007 Hunter’s aesthetic has been minimal, toying with where masculine and feminine design converge, blending tailoring with delicate, ladylike details. She’s looking for new stockists - one to say ‘g’day’ to, for sure.

www.carly-hunter.com

 

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