Online boom not deterring global retailers
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Global retailers are undeterred from expanding their bricks and mortar stores this year despite growing online sales, says a new report.
In the seventh edition of How Active Are Retailers Globally?, real estate service company CBRE also says China remains the top target market of global retailers in Asia-Pacific. Its study covered more than 150 major international brands based in the Americas, Asia Pacific and EMEA.
While European countries dominate the target destinations this year, China is the top target market in Asia-Pacific and the fourth most popular globally, with 27 per cent of retailers looking to expand there. This is followed by Hong Kong in sixth position (24 per cent), Japan seventh (22 per cent) and Singapore ninth (21 per cent).
Globally, the top three were Germany (35 per cent), France (33 per cent) and the UK (29 per cent).
China and Hong Kong maintained fourth and sixth place respectively, while Japan (seventh), Singapore (ninth) and Australia (11th) all rose higher in the rankings, up from 13th, 18th and 15th respectively.
Most Asia-Pacific markets saw increased interest for this year compared with last, except for China and South Korea, which softened somewhat, says the report. Meanwhile, interest in Southeast Asia surged, with Malaysia (10 per cent), Indonesia (9 per cent ), Thailand (8 per cent), Vietnam (8 per cent) and The Philippines (8 per cent) all receiving more than double the interest they saw last year, when those markets achieved only between 1 and 3 per cent.
When questioned about the risk factors facing them in the coming year, brands indicated that real estate cost escalation (56 per cent) and unclear economic prospects (42 per cent) continue to be at the forefront of their minds.
“We’re seeing more of a challenging economic environment, and concerns such as high operating costs and a lack of quality space mean retailers are somewhat more wary this year,” says CBRE head of research for Asia Pacific Dr Henry Chin.
“A physical store in key locations is still critical to the strength of a brand’s image,”
“However, even as markets such as China and Hong Kong are seeing a slowdown, we see increasing numbers of opportunistic retailers looking to enter markets like Hong Kong, supported by strong underlying consumer demand. Japan and Australia remain attractive, while Southeast Asia showed strong growth because of opportunities for retailers around an expanding middle class and stronger economic growth.”
He says there are still opportunities for retailers to grow their business in Asia, as the region has four of the top 10 most popular destinations worldwide.
“The goal now for all brick-and-mortar retailers is to build an engaging offer that encourages people to stay longer and spend more,” says CBRE senior director and head of retailer representation Joel Stephen.
Of the brands surveyed, 83 per cent suggest their physical store expansion plans for this year will not be affected by the growth of eCommerce, and only 22 per cent see online retailing as a threat to their business.
At the same time, retailers are cautiously optimistic about physical expansion. Of those questioned, 17 per cent have large-scale ambitions, many of them looking to open more than 40 stores this year (up from 9 per cent last year). Most retailers (67 per cent) are considering up to 20 stores.
“A physical store in key locations is still critical to the strength of a brand’s image,” says Stephen. “Stores still need to create an emotional affinity with shoppers, and customers still feel a need to go into stores, to touch a product and enjoy the feel-good factor associated with a particular brand experience.
“The store is integral to the shopping journey and can be used in a number of different ways, such as to click and collect, research of the product or brand, or to test the product. It isn’t solely about the transactional side.”
In a new trend, a fifth of brands, largely from the Americas and EMEA, intend to expand into travel hubs such as airports and train stations this year to gain access to high footfall in busy locations. However, for Asia-Pacific retailers, shopping malls are still the most-preferred destination by far (nearly 90 per cent).
While globally the key concern for brands in lease negotiations is “lease length”, Asia-Pacific retailers are most concerned with turnover rent clauses as well as changing consumer behaviour (40 per cent), which is higher than the global average (31 per cent).
Questions & Answers
Q.What are the primary concerns for retailers planning their expansion this year?
What are the primary concerns for retailers planning their expansion this year?
Retailers are mainly concerned about escalating real estate costs, cited by 56 per cent, and unclear economic prospects, which was a worry for 42 per cent of brands. These factors are at the forefront of their minds for the coming year.
Q.How do retailers view the growth of online sales in relation to their physical store plans?
How do retailers view the growth of online sales in relation to their physical store plans?
Most retailers are not deterred, with 83 per cent stating their physical store expansion plans will not be affected by e-commerce growth. Only 22 per cent see online retailing as a threat to their business operations.
Q.Which specific Asian markets have seen increased interest for retail expansion this year compared to last?
Which specific Asian markets have seen increased interest for retail expansion this year compared to last?
Most Asia-Pacific markets attracted more interest this year, notably Southeast Asia. Malaysia, Indonesia, Thailand, Vietnam, and The Philippines all received more than double the interest they saw last year.
Q.What is the strategic importance of physical stores for retailers, even with the rise of online shopping?
What is the strategic importance of physical stores for retailers, even with the rise of online shopping?
Physical stores in key locations are crucial for a brand's image and to create an emotional connection with shoppers. They also serve as integral points for activities like click and collect, product research, or testing, extending beyond just transactions.
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