Posts Tagged ‘Forever 21’

Follow me to Oz

July 13, 2010

So, despite my repeated naysaying it seems not only is US ragtrader The Gap definitely coming to Australia (their first store will open in Melbourne next month), but they may well be leading a serious onslaught of entrants into the Aussie market.

According to this hype-heavy piece, the list of fashion retailers eying off Aussie wallets now includes Banana Republic (a Gap brand), Forever 21 (from US), Topshop (UK), and Uniqlo (Japan). While I am still taking this talk with a big grain of salt, there is certainly a long tradition of follow the leader amongst multinationals.

This behaviour may reflect several underlying motivations. Rivals may be concerned about early movers locking up resources and this limiting the scope for late moves.

In the retail domain there are grounds for concern that early movers may secure prime store locations, although this is much more of an issue in groceries and fast food than in fashion.  Indeed in fashion, it is more likely any early advantage comes from building stronger relations with landlords and property brokers as anchor tenants.

Unlike fastfood, the franchising model used is only likely to be rolled out at a country-level (i.e. companies are awarded the right to run all stores in a state or country, rather than companies that then sub-franchise to individuals store-by-store), so there is a less of a race to secure franchisees and/or build reputations.

Interestingly two of the most successful internationalisers H&M and Inditex (i.e. Zara) remain very tightlipped about any Aussie plans.  Both firms are much less inclined to franchise (mainly because they control their value chains much more tightly than the others on this list). They’ll need a lot more convincing that Australia represents sufficient bang for their buck/Euro/krona.  I suspect they still see Australia as small fry.

But I’m reluctant to say never anymore. The  performance of their international rivals down under may well play out as the demonstration effect (that this is a market worth seeking) that is a further key aspect of following.

Perhaps they’re Yanking our chain

February 24, 2010

Rumours continue to abound regarding the imminent arrival in Australia of a wave of US retailers.  This article names a long list of firms reportedly considering a down under arm, including:

The article raises some interesting examples of “success” by US retail firms/brands (e.g. Apple, Athlete’s Foot, Tiffany’s) and some duds (Starbucks, Disney).  I’m not yet convinced by the robustness of the arguments that entry into Australia will be easy, or that consumers are desperately awaiting these US firms.  There are some nice quotes here about why US firms need to be careful:

“US retailers need to really consider whether the product being offered is American-centric or appeals to a global audience.”

“If American retailers can offer something different to the market, they’ll be a winner.”

“An American retailer may not have a massively different product range to rivals such as Cotton On or Just Jeans, but if they have a brand name with a good amount of demand behind it, they’ll be able to sell and thrive.”

“They do need a brand power…But they also have other things, such as a geographical supply chain advantage, a strong Australian dollar and the ability to handle more retail virtually than at any time before.”

It is intriguing that a number of the brands are looking to enter via franchising (particularly the first four on the list).  There is the usual logic for doing this (shifts big chunk of the cost burden and risk on to others, and may allow local franchisees to adapt to local tastes).  There are BIG potential pitfalls too – misaligned processes, poorly supported brands and marketing, inadequate screening and nurturing of franchisees.

My expectation is that less than half of these firms will end up showing up in the shopping centres of Australia. Hype will always outweight reality. Nevertheless, my “melting barriers” analogy seems to be holding up.

I will return to the list again in a later post to explore some of the geographic angles of this (following on from Sakshi’s discussion of a couple of months back).