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CBRE Report: How Global is the Business of Retail

BritCham / CBBC
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Hong Kong is the world’s hottest retail market, attracting significantly more new entrants than any other city, according to the 2013 edition of How Global is the Business of Retail? by leading global property advisor CBRE. CBRE’s annual survey, now in its sixth year, maps the global footprint of 320 of the world’s top retailers across more than 200 cities, tracking cross-border retailer movements. The report found that retailers expanded into a wide range of markets in 2012, with 81% of cities seeing at least one new retailer enter the market.

U.S. retailers are by far the most aggressive when expanding store networks globally. Traditionally U.S. retailers have focused on Asian and Western European markets; however, they are increasingly targeting the Middle East (18% of all new entrants to the region were from the U.S. last year), Central & Eastern Europe (17%), and Latin America (10%). Italian, British and French retailers are also highly active, focusing mainly on their own region, although Asia is also a key target.

Hong Kong was by far the most sought after city with 51 new retailer entries from all sectors – not just the high-end fashion brands that have traditionally targeted the market. These new entrants are principally from Europe, but also from the U.S., Japan and Korea.Peter Gold, Managing Director – Retail, Cross-Border EMEA, CBRE, commented:“Hong Kong provides an opportunity for retailers to capitalise on the emerging middle class population and tourists from mainland China. Hong Kong is often used as a launch pad for brands entering the region although increasingly retailers are entering Chinese cities directly. While luxury brands led the way in 2012, retailers from across the spectrum opened their first store in the city last year, including Pierre Cardin, Forever 21 and Cos.”

Mature markets dominated retailers’ expansion plans last year although five emerging markets made the top 20. Kiev was in second place with 39 new entrants, with Sao Paulo (25 new entrants), Iasi (19), Muscat (17) and Ho Chi Minh City (15) also important targets. This is the second year that Kiev has been ranked in the top 3 globally. A combination of strong growth in real incomes and a serious under supply of quality retail space in the city is driving major shopping centre development, which in turn is attracting a wide range of retailers including Prada, Camper and S. Oliver.

Berlin was in third position in terms of new entrants (28) with Frankfurt (20), Hamburg (19) and Munich (19) also featuring in the top 20. Low unemployment, rising wages and employment levels at record highs have created strong fundamentals for consumption in Germany and are encouraging retailers to target a wide range of cities. Notable new entries in Berlin include Mulberry, Hollister, Pull & Bear, and Zara Home (which also entered Munich).

Singapore (25) has quickly established itself as a regional hub, and is used as a gateway by international retailers looking to expand in South East Asia. The city has benefitted from an influx of regional tourists, to attractions such as the “Gardens by the Bay” and the “River Safari”, while new shopping centre development continues to create opportunities for global retailers to enter the market.

In terms of the world’s most mature markets (by the number of international retailers that already have a presence there), Dubai saw 25 new entrants in 2012, closely followed by Paris (24), London (23) and New York (20).

Figure 1: Top Target Markets in 2012 (number of new retail entrants)

1

Hong Kong

51

Mature

2

Kiev

39

Emerging

3

Berlin

28

Mature

4=

Singapore

25

Mature

4=

Dubai

25

Mature

4=

São Paulo

25

Emerging

7=

Paris

24

Mature

7=

Tokyo

24

Mature

9

London

23

Mature

10=

New York

20

Mature

10=

Frankfurt

20

Mature

12=

Lasi

19

Emerging

12=

Warsaw

19

Mature

12=

Hamburg

19

Mature

12=

Munich

19

Mature

16

Muscat

17

Emerging

17=

Ho Chi Minh City

15

Emerging

17=

Toronto

15

Mature

17=

Moscow

15

Mature

17=

New Delhi

15

Emerging

17=

Lyon

15

Mature

Europe was the most targeted region attracting 49% of new entries, followed by Asia with 24%, and Middle East and North Africa (MENA) with 11%. Latin America, North America, and the Pacific region attracted 9%, 7% and less than 1% respectively.

At a sector level, ‘Mid-Range’ fashion retailers entered more new markets than any other sector last year, accounting for 22% of all new openings, followed by ‘Luxury and Business Fashion’ retailers (20%). ‘Coffee and Restaurants’ (13%) is another growth area, as international retailers expand to meet consumer demand for entertainment-based retail.

The global rankings of retailer representation has not changed significantly in the last two years, as virtually all of the 320 retailers tracked typically have a presence in the leading retail markets. London retains its number one position, with Dubai still comfortably in second place. Paris moved up one place to third, replacing New York which is now in fourth place along with Moscow. Hong Kong and Madrid remained in sixth and seventh place respectively. The only significant mover was Beijing, which moved up to 8th place from 13th.

In addition, CBRE has also conducted an analysis of the level of retailer penetration at city level and identified potential growth markets. Examining a representative sample of 20 major global fashion retailers in 208 cities across the world, the statistics indicate that global fashion retailers have been quick to take advantage of the opportunities in fast growing maturing markets. Beijing and Shanghai top the ranking of retailer penetration at city level. 376 fashion retailer stores have entered Beijing and the number is 336 in Shanghai. In the fast growing Chinese market, opportunities for retailers to expand store coverage still remain.

Emerging markets also show a significant potential for further store expansion. A high proportion of retailers already have a presence in China’s Tier 2 cities like Chengdu and Shenyang, but the levels of penetration still remain low. Chengdu has only 132 stores and Shenyang has 107 stores, Chengdu has just 35% of fashion outlets present in Beijing (see Figure 2). Penetration levels are much less in cities as Dalian (14%), Suzhou (13%) and Qingdao, Xi’an and Ningbo (all 10%). Considering the high level of retailer penetration achieved by fashion retailers in Beijing and Shanghai, the large size of most Tier 2 cities and the already existed retailer presence in these cities, these Tier 2 cities are supposed to have a substantial opportunity for retailers to increase their store coverage at city level.

Figure 2: Market Penetration of Fashion Retailers in China

City

Proportion of 20 retailers present in the city

Number of retailer stores

Retailer stores as A% of Beijing

Shanghai

100%

339

90%

Beijing

90%

376

100%

Chongqing

80%

87

23%

Hangzhou

80%

57

15%

Shenyang

80%

107

28%

Nanjing

75%

50

13%

Shenzhen

75%

69

18%

Suzhou

75%

50

13%

Chengdu

70%

132

35%

Dalian

70%

53

14%

Tianjin

70%

78

21%

Wuhan

70%

83

22%

Guangzhou

65%

88

23%

Ningbo

65%

37

10%

Qingdao

60%

37

10%

Xi’an

55%

37

10%

Peter Gold added: “In general, lack of new prime retail space globally is limiting the ability of some retailers to meet their expansion plans. This is most notable in mature markets, but also affects many emerging markets where much of the new development is in the peripheral areas of large cities, appealing only to domestic brands. Retailers are also more selective than ever – both in terms of the countries they choose and the type of space they take, with the focus firmly on the best space in the biggest cities.

“The growth of online retailing is further increasing the rigour with which retailers are analysing their portfolios. While some will downsize their store presence, the vast majority is embracing the multichannel approach - they are developing their online presence, but they are also investing in new store openings and their existing stores. For many retailers, opening stores in new markets is also a priority, underpinning our view that cross-border activity will continue at a steady pace in 2013.”

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