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British retailers target overseas for growth
E-commerce is preferred route to market, with Germany seen as having most potential, according to Barclays.

By Suzanna Bain

29 August 2012

Two thirds of British retailers (66 per cent) expect their overseas sales to increase during the next five years and think Germany is the market most likely to provide growth, according to new research.

Nearly a quarter (23 per cent) of retailers say Germany is their number one choice for overseas expansion in the next five years, closely followed by China and Australia.

The results support recent announcements from Arcadia and Next about stepping up their expansion plans, with Arcadia reportedly opening its first outlets in Germany (in partnership with Karstadt) and Next launching a Chinese-language site later this year.

“British retailers haven’t ventured into Germany for a very long time and it is only in the last few years, as the economy has strengthened, that it has come to the fore again,” says Richard Lowe, head of retail and wholesale at Barclays, which carried out the research.

“The beauty of Germany, for clothing and footwear retailers in particular, is that it has a similar climate to the UK, so there is no need to spend time and money adapting lines,” he adds.

More than two thirds (68 per cent) of British retailers currently generate at least some of their sales from outside the UK, but the percentage of sales made abroad remains relatively small, with nearly 80 per cent of retailers generating less than a quarter or their turnover overseas.

But, as trading conditions in the UK continue to be tough, the number of retailers looking for growth overseas is on the rise.

“The retail history books are littered with stories of British retailers who bravely planted flags on foreign high streets, only to beat hasty retreats,” continues Lowe. “The US, in particular, was notorious for being a graveyard for many a retailer.”

Today, the US is the top overseas destination for British retailers, with companies such as Tesco (via its fresh&easy brand) and Burberry (which has more than 60 stores in theUS) having a presence there.

However, international expansion is no longer the preserve of retail giants. The borderless retail landscape created by e-commerce means it has never been easier for smaller British retailers to expand overseas swiftly, without the associated overheads of opening physical stores.

Of those retailers already generating sales abroad, 35 per cent are said to be from bricks and 65 per cent from clicks.

Transactional websites are the preferred method of entering new overseas markets for 62 per cent of retailers, the research reveals, while just 18 per cent plan to open physical stores. A further 18 per cent are exploring a joint venture and 13 per cent a franchise partnership.

“E-commerce allows retailers to test the local appetite for their brand without having to step foot in a country,” says Lowe.

“Many of the industry’s past mistakes were made because retailers didn’t give enough consideration to the dynamics of the local market in terms of whether their products would have the same appeal abroad as they did at home, or whether they would need to be localised,” he adds.

The countries least likely to see increasing numbers of British names on their high streets are Portugal, Ukraine, Bahrain, the Czech Republic and Latvia.

Asked about the general prospects of the British high street and consumer spending, retailers believe it will take at least another two years before there’s a sustained recovery in consumer spending in the UK. 

Today’s top five overseas markets for UK retailers.*

  • USA
  • Asia (general)
  • Australia
  • Germany
  • India

 Tomorrow’s top five markets for UK retailers.*#

  • Germany
  • China
  • Australia
  • Europe (general)
  • USA

 

*In terms of sales growth.

# Five years’ time.

 

 

 
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