Australia's under pressure retailers can't take a trick. Already under the pump thanks to weak consumer confidence and a reportedly weak Christmas shopping season, more bad news is about to flood through their front doors.
Another wave of international retailers, taking advantage of the low Australian dollar, are set to expand operations locally, or set up a toehold in the coming year.
In a new report, accounting firm Deloitte has pointed out that with the lower Australian dollar and increasing competitive pressures, overseas retailers will continue to see interest in Australia's retailers and the retail market. The report notes that 37 of the world's top 250 retailers by revenue already operate in Australia, including South Africa's Woolworths Holdings – which took over Country Road and David Jones last year, Costco and hardware giant Lowe's – which has a joint venture with Woolworths Limited (ASX: WOW).
We've also seen Japan's Uniqlo, Spain's Zara, H&M of Sweden, US homewares retailer Sonoma, Ikea, Apple, Germany's Aldi and US TopShop either setup shop in the past two years, or expand their operations significantly. Global cosmetics retailer Sephora set up shop late last year as well, posing a significant threat to Australia's department store retailers, David Jones and Myer Holdings Ltd (ASX: MYR). Cosmetics are some of the department stores' highest margin, best selling products.
OrotonGroup Limited (ASX: ORL) lost its distribution licence with Polo Ralph Lauren in 2013, when the global upmarket retailer decided to go it alone but has managed to score 10-year deals with US apparel giant Gap and Brooks Brothers. Oroton is now rolling out a number of Brooks Brothers and GAP stores.
Clearly, international retailers see scope for them to expand in Australia, either through takeovers, greenfields stores, joint ventures or distribution and licencing deals. But Deloitte also point out in the report, "What should be of concern to Australian retailers is that 85% of the top 250 retailers aren't yet operating in Australia – meaning competition is only likely to increase."
If Australia's retailers thought they only had to contend with low consumer confidence, they've got a bigger issue coming.
