Australia presents a huge opportunity for UK brands and retailers, but it is crucial to crack your online offer before opening stores, says Naomi Bikis
Vast swathes of Australia may be uninhabitable outback, but for UK brands and retailers it is fertile territory. Australia has a relatively stable economy, high wages and increasingly fashion-conscious consumers. As a result, British brands are flocking to its shores, with Reiss, Debenhams and Karen Millen among those to open their first stores and concessions in the market over the past six months, following in the footsteps of Asos and Arcadia.
But Australia is not without its challenges. Bricks-and-mortar retailers are faced with some of the most expensive real estate in the world, fierce competition for premium store locations and high wage bills. UK businesses are therefore advised to make sure they have cracked their online offer Down Under, before making a commitment to physical space. Online retailing reduces risk by helping retailers to get a much better understanding of demand and make sure their supply channels are working well.
But UK brands need to understand what Australian customers want from their online experience. Logistics company wnDirect surveyed 1,000 online clothing consumers in Australia at the end of last year. The report showed that almost a quarter (23%) had shopped with an international brand or website within the four weeks before the survey. It found that 25-to-34-year-olds were the most likely demographic to buy from international brands, particularly from the US and UK. It also highlighted a number of factors deemed important by those surveyed, from free or flexible returns (they would happily use lockers and local depots) to speed.
Because of their geographical isolation, Australian customers have been accustomed to waiting to receive orders. However, they increasingly value immediacy and are less willing to pay expensive shipping costs. This is particularly important to women (70%, compared with 67% of men), and to those aged 16 to 24 (75%), while those aged over 55 are the least concerned (63%).
Brands must navigate this by examining their delivery options. Reiss offers delivery within three to four working days and free shipping on orders over A$400 (£206), and Asos ships directly from its distribution centre in Barnsley within three to five days for A$10 (£5.14). However, Karen Millen seems to be the most responsive: it is able to fulfil orders in one to three working days for A$14.95 (£7.70) in metropolitan areas of Australia because it has a distribution centre in Melbourne.
Martin Newman, founder of multichannel retail consultancy Practicology, suggests brands should respond to these considerations with a detailed look at their distribution. “Clearly, what you can’t do is replicate an entire range for the Australian market, but what you might do is take the top 10%-15% of the products that you know [via statistics online] you sell the most of, and have them available locally. You don’t need to set up your own distribution centre – you can use a third-party logistics provider. Then, if somebody orders from one of those top sellers, you can fulfil the order more quickly.” However, Newman cautions that retailers should do this only when there is a clear view of potential demand in the market.
David White, national leader of Deloitte Australia’s retail, wholesale and distribution group, says understanding the impact digital is having beyond ecommerce is crucial. “We did some research on how consumers use digital – laptop, mobile and tablet – in the shopping cycle, from browsing right through to store visits. We noted that 40% of visits to stores are affected by the use of digital in Australia, compared with 27% in the UK.”
As in the UK, the highly digitally engaged Australian consumer now uses their smartphone or tablet to help them to decide if they want to enter a physical store. “What that’s telling us is that, to engage the consumer, it’s not just about shopping online,” says White. ”It’s about understanding how consumers are using mobile and digital to find out about products, and to ask peers what they think of them, whether they are available in store and what the prices are. It’s how you engage with the customers as much before they get into the store as when they are actually in there.”
Once online has offered a chance to test the waters, the next move is a physical presence in the country. But with Australia’s commercial property ranking among the most expensive in the world per square foot, costs are enormous and competition is fierce. Brands have been caught out in the past by expensive real estate, which will be teamed with a higher minimum wage of A$17.70 (£9.20) an hour, up from A$17.29 (£8.99) from July 1.
“Decisions on location, store size and lease terms (price and length) are where a number of international retailers have fallen down in the past,” says White. “It’s therefore very important for new entrants to have strong local advisers who have experience of helping retailers to enter the market, and who can provide the guidance and oversight that may be lacking initially, owing to time differences, geographical location and competing priorities.”
UK retailers are heeding this advice by seeking franchise partners and licensees. Debenhams announced in October that it had negotiated a deal with Harris Scarfe, a locally based retailer owned by Pepkor, to begin selling its own apparel through the stores.
A common mistake White has seen brands make is to under-invest when first setting up their operations.
“While using off-the-shelf accounting or inventory platforms can save money in the short term, they are often quickly outgrown as the business itself expands,” he says. “Similarly, running separate systems from those used at head office can reduce the visibility of the company’s financial performance and make it harder to oversee and make decisions from afar.”
Try to offer a couple of different seasons within the store rather than one season
David White, national leader of Deloitte Australia’s retail, wholesale and distribution group
A big challenge for those planning dedicated Australian websites or store launches is the topsy-turvy seasonality. Managing the right stock at the right time is an issue with which many retailers have grappled.
For fast-fashion retailers, it can be a struggle to get the assortment and product range right. In stores Down Under, UK retailers should look to provide multi-seasonal choice, says White.
“Try to offer a couple of different seasons within the store rather than one season. I haven’t seen anyone absolutely nail that yet.” Those able to cope are the likes of Zara’s owner, Inditex, which offers a regular supply of new styles and is less affected by unexpected weather conditions.
Counter-seasonal design teams dedicated to the Australian shopper are a second way to combat the issue. Topshop initially distributed the same products around the world at the same time. It then created specific trends targeted at the Australian market, before beginning to design a counter-seasonal range in December last year.
Jacqui Markham, global design director at Topshop, explains: “We make sure pieces are seasonally appropriate by replacing certain styles or altering designs. For example, if we sell a colour-block, cocoon-shaped, faux-fur coat in the UK, we’ll ensure that we update it for Australia’s winter season six months later through the use of different fabric, trims or print. We know that our customers would have seen the original style online, in magazines and on the streets, so it’s important we give them something new.”
For the UK-based design team, distance isn’t an issue. Designers will visit the country on research trips, and Markham says Topshop has “regular meetings with the Australian team, and we analyse sell–through on a weekly basis”.
Asos, which opened a Sydney office in 2012 after launching a dedicated Australian website in 2010, says its design teams in the UK target the customer carefully. “Our Australian customers have access to the latest trends at the same time as our UK customers. From a brand perspective, we have core propositions across our key customer groups, such as students, which we run in all territories, while our local teams ensure that they are delivered taking local nuances into account,” says Carly Cazzoli, Australian country manager.
Despite the challenges for UK brands heading Down Under, the time is ripe for entering the market, says Newman: “There’s no question that, although Australian fashion has improved a lot in the past five years, there’s still a way to go in terms of what’s on offer. Some UK retailers would do quite well. I think fast-fashion players such as River Island and Primark have a relevant range and brand proposition for the Australian market. Paul Smith has a store in Melbourne, but not in Sydney. There could be an opportunity for him to extend the reach of the brand there. Monsoon and Accessorize could do well there too.
“On the average high street in Australia, I still think fashion is under-served.”