Asia Pacific retailers push out to overseas markets
ASIA PACIFIC retailers are expanding overseas because they need to move outside their home country markets to grow. In 2017, over one-third of new retail entrants in Asia were Asia Pacific regional brands, while US and European brands slowed down their expansion.
The Asia Pacific region is the largest retail market in the world, accounting for 39 per cent of the global total, followed by North America with 24 per cent. Up to now, the retail market has been dominated by major global brands from Europe and the US, but in recent years Asia Pacific brands have been growing. Japanese and Korean brands are leading the expansion, accounting for 34 per cent and 18 per cent of the new retail entrants between 2014-2017 in the Asia Pacific market. Successful expansion has mainly been driven by strong brand identity and prime location as well as by leveraging local market expertise.
According to CBRE’s “Rise of APAC Retailers 2018” report, more than half of Asia Pacific retailers are home-grown or independent retailers with operations in one or two Asia Pacific markets. Mid-range fashion and beauty brands are the top two categories leading the expansion activity. Muji was one of the first-movers and opened their first overseas store in London during the 1990s. Today, Muji has over 426 shops in 18 countries with 85 per cent of its stores in the Asia Pacific region. We have seen visible growth of home-grown brands expanding overseas since the early 21st century but the growth has been relatively slow.
Many of CBRE’s regional advisory and transaction services (retail teams) are working with Asia Pacific tenants in opening stores in new markets by advising them on local market conditions, choosing the best locations and negotiating with landlords to achieve the best leasing terms.
Uniqlo, the largest Japanese apparel brand, has been focusing on their overseas expansion strategy as a key driver for their growth. Uniqlo now operates over 2,000 stores in 19 countries with more stores overseas than in Japan, the brand’s country of origin. Uniqlo performs very well overseas, especially in China with 633 stores.
According to its financial statements for Q3 2018, Uniqlo International achieved significant growth in revenue of 23.7 per cent year-over-year, while Uniqlo Japan reported only 6.3 per cent growth in revenue. The company aims to increase the number of its stores in Southeast Asia and Oceania to 400 by 2022.
In Thailand, Fast Retailing Co, the operator of Uniqlo fashion, is planning to open 10 to 15 new stores this year.
The Southeast Asia market is emerging with retailers across Asia expanding rapidly to Vietnam. Thailand’s largest retail conglomerate, the Central Group, is expanding its stores in Vietnam with an additional US$500 million (Bt16 billion) investment.
The Central Group now has 250 stores under Big C, Robins, and Supersports in Vietnam and is aiming to reach 720 stores by 2022.
In Thailand, several local brands are establishing a global presence. Minor international, owner of one of the largest lifestyle retail brands, The Pizza Company, is committed to continuing to expand all of its own brands overseas and now operates over 2,000 restaurants and 400 retail trading outlets in 40 countries.
Earlier this year, several Thai brands expanded overseas. Panpuri, an established wellness brand with over 40 stores in Thailand, opened a flagship store in Ginza, Tokyo’s famous business and shopping district. Greyhound Cafe, a successful Thai restaurant chain with branches in Hong Kong, China, Malaysia, Indonesia and Singapore, also opened their first European outlet in London.
More Asian retailers are outgrowing their domestic markets and the only way for them to expand is to go overseas which, in many cases, is more challenging due to the different consumer behaviour, laws, taxes and property leasing conditions in their home markets.
Note: writer by Aliwassa Pathnadabutr, Managing Director of CBRE Thailand