New research reaffirms the potential of the Chinese and Indian markets for retailers, but categories such as fashion are being outshone by more “necessary” categories such as health.
The research, conducted by the Australian Centre for Retail Studies (ACRS) at Monash University, is based on a survey of 219 senior retail executives from around the world.
The executives were asked for their view of the year ahead.
The survey found 45% of retail executives felt economic instability would have a strong impact on retail spending, while 50% thought it would have a moderate impact.
Australian and New Zealand executives reported the lowest level of optimism in the world.
The survey rated China and India as the best growth markets globally, while Western Europe was rated as the worst growth prospect.
“Retailers operating in China, the Middle East, Africa and India all expected sales to increase in the year ahead,” says ACRS research director Dr Sean Sands.
“Australia, New Zealand, North America, and Central and Eastern Europe expected there to be little change.”
Sands says retailers looking to enter markets such as China and India need to ensure their offering is localised, and should not underestimate the legal issues they may face.
“Some of the retailers doing quite well [overseas] are the Just Group, Kikki.K and Typo,” he says.
“One of the issues [retailers] have to face is around legislation… We’ve seen brands like Diva move into Russia and it had a lot of issues around the Russian market.’
“There are a lot of backdoor processes you have to go through… The second [mistake] is assuming markets are the same.”
One way to test a new market without launching an entire operation is to go online, Sands says.
“Australian retailers can take their products online – Sportsgirl and other fashion brands are doing quite well in countries like Singapore [via an online presence],” he says.
“They’re tracking their sales and their visitation through Google Analytics and… social media.”
But overall, Sands says categories such as health and convenience – including pharmacies – are faring much better in Asia than discretionary categories such as fashion.
Meanwhile, with regard to Western Europe, Sands says the situation is unlikely to improve anytime soon, despite the size of the market.
“Research suggests that it’s not a potential growth market at this point in time. That’s why the likes of Zara are looking at other markets,” he says.