Global retail expansion continues despite tough trading conditions
London, 11 April 2011 – Global retailers have continued to grow their store networks in a wide range of international markets despite challenging conditions, according to the 2011 edition of How Global is the Business of Retail? by CB Richard Ellis (CBRE).
CBRE’s annual survey - now in its fourth year - mapped the global store footprint of 323 of the world’s top retailers across 73 countries to identify trends in global retail expansion at national and local levels. The report found that although the global economy pulled out of recession in 2010, it remains a testing time for retailers, with consumer spending subdued in many markets and fewer new shopping centres making it more difficult for retailers to access prime space.
The United Kingdom (UK) maintained its position as the world’s most international retail market for the fourth year running, attracting 58% of all international retail brands surveyed. The UK is closely followed by the United Arab Emirates (UAE) with 54%, and the US with 50%.
Europe continued to dominate CBRE’s rankings of the most highly penetrated global retail markets, with the continent’s five largest economies all featuring prominently in the top 10 international retail destinations: UK (1st), France (4th), Spain (5th), Germany, (6th), Russia (8th), and Italy (10th). However, the top 20 is increasingly global as retailers target key emerging markets in addition to established retail destinations. Turkey experienced the largest growth in retailer presence in the past year, with 39% of all retailers surveyed now located there, up by 2.2%. Belgium, Poland, Egypt, Vietnam, Brazil and Mexico also saw retailers increase their presence by 1.5% or more.
International expansion remains a key strategy for retailers throughout the world, with 40% of new openings occurring outside the retailer’s home region. Even though the pace of expansion has slowed, with the overall store footprint increasing by 2% in the past year compared with 4% in 2009 and 12% in 2008, some 21 countries saw five or more new retailer entrants last year. At a country level, retailers from North America expanded their global markets the most, growing their footprint by 2.6% on average, while European and Asia Pacific retailers both grew by 1.8%.
Peter Gold, Head of EMEA Cross Border Retail, CB Richard Ellis, commented: “Although the pace of growth slowed in 2010, retailers continue to grow their store networks in a wide range of international markets, targeting both mature and emerging countries. While it is clear that the globalisation process is ongoing, two factors will limit the rate at which retailers expand in coming years. Firstly, a limited pipeline of new space in many markets will restrict access to prime retail locations, and as a result, more retailers may look to grow their business via online platforms rather than expanding their physical store network.”
Looking at CBRE’s research into new store openings, India tops the rankings with the largest number (eight) of new retailers entering the market in the past year, followed by Turkey with seven, and the UAE, Kuwait, Ireland, Romania and Belgium all attracting six new retailers. With high consumer confidence and an economy that grew by an estimated 8.8% in 2010, India was largely unaffected by the recession that hit most European and American countries and is currently an attractive proposition for international retailers.
The Middle East also continues to be a major target for international retailers. Following the large number of new entrants in 2009, the UAE fell back slightly in 2010 in terms of its place in the new entrant rankings; however, this is relative to the high proportion of retailers already present in Dubai and retailers remain very active in the region, with Kuwait (six new entrants) and Saudi Arabia (five) proving popular.
Peter Gold added: “Historically, Dubai has been the entry city to the Middle East, but now retailers are looking to replicate their success in other Middle Eastern countries with a similar consumer base. Essentially this means a wealthy, well educated, and well traveled population with a high propensity to use modern shopping malls. Kuwait and Saudi Arabia fit the bill, as does Abu Dhabi where two new shopping centre openings is likely to make it a bigger destination for new entrants than Dubai next year. The recent unrest in the Middle East cannot be ignored, but it is unlikely that this will have any long-term impact on retailers’ desires to expand into the region.”
Turkey also experienced significant new store openings, with retailers attracted to a growing and increasingly affluent middle class. Consumers have been quick to adopt Western styles of consumption in recent years due to a cosmopolitan outlook of a young population and its ability to shop in newly-built, high-quality shopping centres. The prospective EU candidate now has 3.5 million square feet of modern shopping centre space and the second largest pipeline in Europe, with 1.5 million square metres planned.
Peter Gold added: “Turkey is likely to remain a key target for retailers for the foreseeable future, with consumer spending forecast to grow by over six percent per annum over the next five years - one of the strongest growth rates in Europe.”
Surprisingly, Ireland also features high up CBRE’s new openings rankings, with retailers taking advantage of rarely available prime space, rental levels that are considerably lower than peak level, and rent free periods of 12-15 months. These incentives, together with the opportunity to gain representation in prime pitches, clearly outweigh concerns over the economic situation, and demonstrate retailer confidence in the long-term prospects of the Irish retail market.
To read an executive summary of the 'How Global is the Business of Retail?’ report, please click here.