Germany is most likely market for growth according to new research
Nearly a quarter (23%) of retailers said Germany was their number one choice for overseas expansion in the next five years, closely followed by China and Australia. The results support recent announcements by Arcadia and Next which are stepping up their expansion plans with Arcadia reportedly opening its first outlets in Germany in partnership with Karstadt, and Next launching a Chinese-language site later this year.
Richard Lowe, Head of Retail & Wholesale at Barclays, said,“British retailers haven’t ventured in to Germany for a very long time and it is only in the last few years, as the economy has strengthened, that it has come to the fore again. The beauty of Germany, for clothing and footwear retailers in particular, is that it has a similar climate to the UK so there is no need to spend time and money adapting lines”.
More than two thirds (68%) of British retailers currently generate at least some of their sales from outside the UK, however, the percentage of sales made abroad remains relatively small, with nearly 80 per cent of retailers generating less than a quarter or their turnover overseas. But, as trading conditions in the UK continue to be tough, the number of retailers looking overseas for growth is on the rise.
Richard Lowe continued: “The retail history books are littered with stories of British retailers who bravely planted flags on foreign high streets only to beat hasty retreats. The US, in particular, was notorious for being a graveyard for many a retailer”.
The borderless retail landscape created by e-commerce means it has never been easier for smaller British retailers to expand overseas swiftly without the associated overheads of opening physical stores. Of those retailers already generating sales abroad, 35% are said to be from bricks and 65% from clicks.
When asked how they plan to enter their chosen markets in future, online is the top choice with 62% of retailers using a transactional website as the preferred method of entry. Just 18 per cent of retailers plan to open physical stores. A further 18 per cent are exploring a joint venture and 13 per cent a franchise partnership.
Richard Lowe said “e-commerce allows retailers to test the local appetite for their brand without having to step foot in a country. Many of the industry’s past mistakes were made because retailers didn’t give enough consideration to the dynamics of the local market, whether their products would have the same appeal abroad as they did at home, or whether they would need to be localised”.
Today’s top five overseas markets for UK retailers*
• Asia (general)
Tomorrow’s top five markets for UK retailers *#
• Europe (general)
*In terms of sales growth
# 5 years’ time
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Jon Copestake, retail analyst from the Economist Intelligence Unit comments,"Retailers looking for joy in Germany could be very disappointed. German retail growth has been stagnant or negative for some years with an equally weak outlook, especially considering fallout from the Eurozone crisis. German consumers are bargain conscious and discounters such as Aldi and Lidl have a good market share. Retailers such as Neckermann, Karstadt and Metro AG, one of the world's largest retailers, have all been forced to cut jobs in recent months. For branded apparel things may be different and brands still appeal to aspirational consumers in a relatively polarised shopping culture, but the market could be fraught with risk as Eurozone uncertainty continues to dominate.”
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