Australian retailers can expect more international competition, according to Deloitte’s Global Powers Retailing Report, which highlights three key disruptors to our local retail market.
The Global Powers of Retailing report identifies the 250 largest retailers around the world based on publicly available data for FY2016, and analyzes their performance across geographies and product sectors. There are now 38 Top 250 global retailers operating in Australia.
While the Australian retail market has grown, some of that has been negated by the arrival of new international competitors, according to David White, national leader of Deloitte’s retail, wholesale and distribution group. “In 2017 we saw a retail market that was growing overall, but at the same time, the level of competition amongst retailers also continued to increase.”
Ongoing population growth, a strong tourism market and improving wages are all set to ensure the overall retail market continues to grow in 2018. “However, with the increase in competition from both international and domestic retailers, we can expect to see further consolidation in the sector,” says White.
Over the past 12 months, new players outside of the Top 250 have entered Australia – and this trend looks set to continue, according to White. Some of these include UK sporting goods retailer JD Sports, which now has five stores in Australia. In addition, well-established international players in the luxury retail market, such as Swarovski and Tiffany & Co, have opened new stores, expanded existing footprints and introduced new brands to our market.
White also expects a continuation of the strong interest from international retailers for acquisition opportunities in Australia. With the continued competitive pressures, further consolidation can be expected in 2018, particularly in the apparel sector.
The calm before the storm
While the global retail environment appears to be relatively stable, Australia is facing a number of potential disruptors which could have a significant impact on the retail landscape, according to White, who says the key disruptors to look out for are Amazon, Lidl and China
- Amazon – Whilst the online retailer’s initial launch of its on-shore business didn’t have the big bang effect some commentators were expecting, White says underestimate Amazon at your peril. “As Amazon builds out its infrastructure and services in Australia in 2018, we can expect its presence and influence on the market to grow significantly, particularly in the second half of the year and in the lead up to Christmas. We’ll have to wait and see the ultimate impact of Amazon’s on-shore business in Australia, but it’s important to remember this also creates opportunities for Australian retailers.”
- Lidl – There continues to be significant speculation the discount supermarket operator, owned by the 4th largest retailer in the world, The Schwarz Group, is preparing to enter the Australia market following recent land purchases, securing of trade markets and talent acquisition. “Should Lidl choose to set up shop in Australia, it will take time for the full effect to be felt, in much the same way Aldi took a number of years to grow its market share here. The impact of Lidl in markets such as the UK has been transformational for the sector. It’s certainly another case of wait and see,” says White.
- China – A number of Chinese retailers and e-platform providers are either entering the Australian market or expanding their operations here. Whilst they are currently only sourcing and selling highly sought after Australian products to Chinese consumers, in 2017 Alibaba opened its Australian headquarters in Melbourne, JD.com has already followed suit in February this year, and Vipshop Holdings (VIP.com) opened its new distribution centre in Sydney as it seeks to partner with more Australian retailers. “These fast-growing Chinese retailers and e-commerce platform providers are starting to make a significant impact on the global retail market. This provides Australian retailers with a huge opportunity to take advantage of high Chinese demand for Australian products.”
With only 15 percent of the Top 250 retailers globally operating in the Australian market, the retail report says that we can expect further competition to come from international retailers. “And with so much change and uncertainty in the Australian retail landscape, 2018 could be a pivotal year for many Australian retailers,” White adds.