I’m clicking to Westfield

Aussie shopping centre powerhouse Westfield (the world’s biggest shopping centre operator) announced a curious brand extension last week. The firm is reportedly planning to use its website as a virtual shopping mall, hosting e-commerce interfaces for a variety of retailers (with fashion being the rumoured kick-off).

So, is this a good move for Westfield?

As I’ve argued elsewhere, Westfield has five particularly powerful competencies: (i) property selection; (ii) redevelopment; (iii) financing; (iv) retailer relations; and (v) branding and marketing . The first three have no relevance to this venture, so the firm is only left with retailer relations and branding/marketing.

Source: Daniel Austin (d)Not

The retailer relations is partially about Westfield’s capacity to offer a more extensive suite of locations relative to rivals and the resultant bargaining power they wield as a landlord. It is also about Westfield’s extensive monitoring of tenant sales and sophisticated contracting processes.

Westfield already carries some information about tenants on their website, and because of their prominent landlord status can certainly attract the attention of these firms. I would be stunned if any of the retailers would grant Westfield exclusive rights to host/direct traffic to their e-commerce portal. Indeed, e-commerce is a substitute to the physical interface, and a mechanism these retailers can use to more effectively negotiate with Westfield as a landlord. Westfield will need to tread much more carefully in these e-relationships.

The counterbalancing angle may spring from the final competency – branding/marketing. Westfield was a global pioneer of using a common brand for their malls (indeed, my post title reflects the reported source of this brainwave – a founder heard a shopper saying they were “heading to Westfields”, and saw the scope for differentiation).

It may well be the case that online shoppers welcome the ‘browsing’ capacity of a virtual Westfield mall. New/small retailers with limited capital to expand their bricks and mortar footprint across Westfield’s 119 malls, may relish being next door to Zara, The Gap and Gucci on the Westfield website. It may also be a mechanism for virtual internationalisation. This could be a chance for Aussie retailers to test the waters in the US, UK and NZ without crossing an ocean. Presumably solely e-commerce retailers could also tap into this spillover effect. Getting this right could also extend consumer awareness of Westfield beyond their current whitebread Anglo markets.

The big challenge is making the site sticky enough. Westfield will need to fill the competency gap in build a user interface that is engaging, exciting and innovative. If they don’t get it right quickly someone could easily build a rival (Google perhaps?).

The uspide for Westfield is that there isn’t much downside here. I wouldn’t think there is an enormous investment required here. It is just a mechanism to augment an already profitable business (and perhaps distract some investors from the firm’s exposure to property price and finance risk).

Verdict? Interesting experiment that could conceivably secure some first mover/network effect advantage.

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So where the bloody hell are the global retailers?

In 2006, Australia ran an ill-fated tourism campaign with the tag line “So where the bloody hell are you?”

The latest list of the 250 largest retailers in the world has just come out from Deloitte, and we could be asking the same question of international retailers with respect to the Australian market.

Back in a 2007 chapter (for a book called The Internationalisation Strategies of Small-Country Firms: The Australian Experience of Globalisation), I highlighted the limited presence of retail’s big international players in the Aussie market. The list back then was 13 foreign-owned firms from the Deloitte’s 2006 Top 250, plus 3 Australian firms who were big enough to make the list.

Looking at the 2009 list, there has been a slight decline in this international presence in the intervening three years. There are now only 14 firms from the list operating bricks and mortar stores in Australia. They are (with global ranking, and new arrivals in green):

10. German discount supermarket giant Aldi who operate in 15 countries
22. Aussie behemoth Woolworths (3 countries)
29. Wesfarmers, owner of the Coles, Target, K-Mart and Bunnings brands in Australia (2 countries)
32. Swedish furniture kings Ikea (36 countries)
42. French conglomerate PPR (Gucci, Puma etc) who have a very minor retail presence down under (48 countries)
59. Toys “R” Us from US (36 countries)
68. French luxury goods firm LVMH (15 countries)
113. Gamestop from US, who poerate as EB Games in Australia (16 countries)
129. South African supermarket chain, Pick’n’Pay, who own Franklins (6 countries)
146. Blockbuster video stores from US (22 countries)
150. Sports chain Footlocker from US (20 countries)
174. Italian spectacles seller Luxottica (OPSM, Sunglass Hut) (20 countries)
214. French firm Lagardére (formerly Hachette) who operate Newslink, Relay, Bijioux Terner and various other shops in airports and train stations (30 countries)

The 2009 list also included book retailer Borders who have recently exited Australia. Also gone since 2006 are Gus/Burberry (UK) due to a de-merger and Metcash (South Africa) via an Australian management buyout. (I, like Deloitte, also had erroneously included 7-Eleven which it turns out is run by a licensee in Australia). The Wesfarmers acquisition of Coles shrunk the Aussie-owned presence (as Bunnings will thus leave the list now). The most substantial new kid on the block is EB Games with almost 200 stores in Australia.

So, why the reluctance to head down under? I have argued this about the impact of Australia’s history and location:

As the nation was geographically distant and disconnected, and local suppliers were protected by high tariff walls, domestic retailers quickly built considerable location-bound advantages over any potential inward FDI. Entrepreneurial locals and later powerful incumbents were able to ‘cherry pick’ concepts from overseas and introduce them to Australian consumers confident of their likely success.

Most of the international firms who have broken through have typically had very strong firm-specific advantages (usually in specialist retail formats), and have been pretty aggressive in their internationalisation. It is worth noting that the average firm in the Top 250 operates in 6.8 countries. All but one of the international players in Australia exceeds that average substantially (while the Aussie pair are underperformers).

Is it the case that only experienced internationalisers can make the leap to Australia? Or do they only bother once they’ve exhausted more rewarding locales?

One of the big boys is heading our way – #9 Costco is building in Melbourne right now. Can we really expect too many more from the list on Australian shores in the near future?