Australia’s next top (retail) model
International fast fashion retailers have recently flocked to Australia, forcing domestic brands to adapt their business models in the face of fresh competition. Cameron Taudevin, JLL Australia manager of retail leasing explains how global names such as H&M, Brooks Brothers and Forever 21 are changing the face of Australia’s high streets.
How has the Australian retail market adapted to make way for international brands?
Local brands have learnt to adapt their business model to account for the influx of overseas brands such as H&M, Forever 21, Uniqlo and Muji which have recently entered Australia.
Domestic brands are making smarter property decisions and improving their production lines allowing them to counter balance the effect that overseas brands have had on their market share. However, a growing demand from overseas brands for larger shops in strip locations is putting pressure on rents, forcing domestic brands from prime high street locations in Sydney, Melbourne and Brisbane.
How are Australian shoppers reacting to increased choice?
The Australian consumer is prepared to pay more for quality items. Well-known national retailers, such as Sportsgirl, Cue and Portmans will retain their place in malls and city centre precincts because of their quality offering.
Larger international brands have filled a gap in the market offering cheaper, fast fashion. Nonetheless, discerning shoppers will remain loyal to domestic brands when it comes to mid-market, higher quality products.
How have Australian high streets changed as these big brands have moved in?
We have seen an increase in pop-up and experiential retail concepts in high streets across major Australian cities. These promotional campaigns usually only last a couple of days, however, they create a great buzz on the main shopping strips across the country. There is also less vacant retail space as the large internationals cement their stake on prime CBD retail outlets.
Will the emergence of new brick and mortar stores dent Australia’s e-commerce market?
In Australia, online shopping became popular in advance of many of these high street additions. Australians are well travelled and familiarise themselves with new brands while overseas. Upon returning to Australia they look to buy these brands online. As a result, online stores were experiencing unprecedented levels of demand which prompted their decision to establish physical stores.
The strength of Australia’s retail market is undoubtedly an enticing prospect for these global brands, but life Down Under is a different ball game for most with seasonal variations and logistical challenges. In your opinion, what are the biggest challenges facing these retailers?
Seasonality is certainly something that varies greatly across the Australian capital cities which requires new entrants to have well thought out stock placement strategies. Melbourne is well known as a city that can experience four seasons in one day and it’s for this reason, coupled with the city’s deep heritage and wealth that Melbourne is considered Australia’s most fashionable city. Distribution is something that the Fast Fashion groups need to consider a lot more than the Luxury Fashion houses. Luxury holding stock is not significant in Australia and most groups re-order from Asia and Europe weekly as required.
Fast Fashion groups however are creating regional distribution hubs. Fashion on the floor in these stores changes weekly creating constant stock flow. Most groups in the Fast Fashion space entering Australia are seeking advice on central locations to allow for expedited transportation across the country. The most significant challenges that new entrants have faced is the lack of available space and well considered entry strategies.
How will Australia’s retail industry fare over the rest of 2015?
As the Australian dollar declines the local market gains increasing overseas investor appeal. Currently in Australia we’re seeing a significant decrease in petrol prices and the Reserve Bank of Australia has just announced a further interest rate cut to 2.25 percent, which is the lowest we have ever seen. Consumers will have more discretionary income as a result of these wider market factors. This will inevitably pass on to retailers driving further improvement to the retail industry.