British department store chain John Lewis has announced it will begin shipping products to Australia as part of an international push that includes plans to offer goods to the United States and over 20 other countries.
The move highlights not only how the strength of the Australian dollar is allowing international retailers to compete with local businesses, but how local shoppers embracing online retail more than ever.
The announcement also comes just weeks after department store giant Myer launched a Chinese-based website in order to ship goods without having to pay GST, in a response to the influx of international retail activity. Harvey Norman has threatened a similar venture.
John Lewis managing director Andy Street said the expansion would be purely online – no stores will be opened in any of the 25 new countries, which also include New Zealand and Singapore.
The expansion is no doubt due in part to the company’s assessment of Britain’s retail environment – chairman Charlie Mayfield told the Financial Times the country is suffering
“Clearly we are at a time when consumers are feeling cautious and confidence is fragile. It feels a little bit like the country is waiting for its exam results. When they come through, people are able to look a bit more towards the future. At the moment, there is a lot of uncertainty.”
The expansion is set to begin in August, following a European expansion plan. A distribution centre will also be constructed in New Delhi, the company said.
But can the company survive? John Lewis is a well-known British brand, but its Australian recognition may not support its expansion.
And others have tried this unsuccessfully before. American department store JCPenney once started an online push in Australia and stopped shortly afterwards due to low sales.
Simon Fonteyn, managing director of Leasing Information Services, says the John Lewis strategy is a good first step, considering how difficult it is for international retailers to open stores here.
“Why? Because they usually want large footprints.”
“It’s different if they just want to do a branding exercise… but it’s also hard to make those stores profitable unless it’s being subsidised by a direct or indirect network they plan to distribute.”
Fonteyn says John Lewis has negated much of the risk of an international expansion by simply shipping to Australia.
“A good way to penetrate a market is to try and go purely eCommerce, and that’s obviously what they’re doing.”
Retail expert Selma Mehmedovic from the Monash University Centre of Retail Studies says while the John Lewis brand isn’t well-known, the shipping method will give them some idea of how well the brand is recognised here.
“Having the online strategy of delivering here is really researching the market,” she says, but adds that “it’s not the most accurate way to determine how successful you would be if you had a physical store.”
The National Retailers Association has also commented on the move, with spokesman Michael Lonie saying the expansion is a low-cost experiment, but also warns it will put pressure on the existing department store market.
“It puts pressure on our department stores, David Jones and Myer, who are clearly under pressure already,” Lonie said.
“I find the timing interesting. The Australian dollar against the UK pound has increased, so that will be a factor.”