Global Powers of Retailing 2017

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2017 set to be ‘fascinating’ year for Australian retail

  • Additional four of the world’s top 250 retailers now operate in Australia
  • Contrasting performances in home improvements sector helps Wesfarmers climb above Woolworths in top 25 global retailers’ placings
  • Australia awaits the arrival of Amazon

24 January 2017: Four more of the world’s top 250 retailers now operate in Australia with others on their way in 2017, according to the Global Powers of Retailing 2017 report from Deloitte. Now in its 20th year, this annual report identifies the 250 largest retailers globally by revenue and examines current global trends and economic prospects in retail.

The total number of the Top 250 operating in Australia remains at 39, the same as last year. Another four have entered the Australian market, while four still operating in Australia are no longer in the Top 250. The new entrants are:

  • American retailer, The TJX Companies Inc. entered the Australian market via the opportunist acquisition of Trade Secret, which operates 35 stores in Australia
  • UK department stores, John Lewis and Debenhams, which joined forces with established operators – Myer and Harris Scarfe – in Australia
  • French leisure good retailer Décathlon, which has yet to have a significant impact on the Australian market.

“Whilst Australia is not a huge market for either John Lewis or Debenhams, the move allows them to, initially at least, expand internationally into a stable market on a relatively small scale,” explained David White, national leader of Deloitte’s Retail, Wholesale & Distribution Group.

The influx of international retailers will continue in 2017 and beyond, driven by Australia’s strong economic conditions relative to other countries, high consumer demand for international brands, and relative proximity to Asia.

“One of the key differentiators international retailers have brought to Australia is in their store design and customer experience model, leveraging their experience from larger markets,” said White. “With just 16% of the Top 250 retailers globally operating in Australia, and US-based retailers making up nearly 50% of that total, we can expect more new global retailers to bring their operations to our shores in 2017. New entrants, coupled with the threat of Amazon, should make for another fascinating year for Australian retail.

“However, we are also seeing Australian retailers slowly fighting back, with investments in store design, concept and flagship stores on the rise. So these new entrants will find Australian retailers better prepared and skilled to take on this new challenge compared to five years ago.”

Commenting on Australian retailers expanding overseas, White said: “In 2016 we started to see more Australian retailers expand their own operations into the US, Europe and Asia-Pacific, but the numbers are still relatively small. With competition in the domestic market threatening saturation in certain categories, we can expect to see more Australian retailers take a leap of faith into overseas markets in 2017.”

Wesfarmers leapfrogs Woolworths in the Top 250

Wesfarmers and Woolworths continue to be the only two Australian retailers represented in the Top 250 at 21st and 24th, respectively (compared to 23rd and 21st last year). Wesfarmers has overtaken Woolworths in the rankings for the first time, largely driven by the continued growth in its Bunnings brand, as Woolworths exits its home improvements business. Discontinued operations are excluded from revenues for the purpose of the report, meaning that Woolworths’ home improvements revenue of US$1.5 billion (AU$2.1 billion) is excluded from Woolworth’s total revenue.

The elephant in the room

Amazon continued its rapid ascent, joining the top 10 leader board of the Top 250 for the first time in FY2015. The world’s largest e-retailer ranked 186th in 2000 when it first entered the Top 250. Fueled by a constant stream of product and service innovations, it has posted robust, double-digit growth since its inception in 1994.

“If Amazon isn’t on the agenda at board meetings for Australian retailers, then it should be,” said White.

With the rumoured arrival of the US giant to Australia’s shores some time in 2017, the potential for major market disruptions is huge, he says.

“We are already seeing several retailers setting up task forces to assess the potential impact of an Amazon market entry, but it’s not yet clear what exactly the company has planned for Australia. But we do know that where Amazon has entered new markets, impacts on local retailers have been seismic and across almost all categories and channels. So retailers can’t afford to wait and see what Amazon does – they need to be developing strategies and taking action now.”

The art and science of customers

Global Powers of Retailing 2017 also examines the art and science of customer engagement to help retailers design fresh experiences, enabled by the right technology, and strengthen customer loyalty. What was once considered futuristic is now table stakes. Retail innovators know technology is no longer supplemental to the shopping experience, it is fundamental. Technology alone, however, is not enough. Customers are seeking new and surprising products and experiences.

The five trends identified in the report are:

  • Less is more. Customers are defining themselves less by how many things they own and more by how curated their lives are in terms of possessions and experiences
  • Following” economy. Customers are seeking experiences and products that reflect the personal brand they promote on social media
  • “Retailisation” of the world. The maker movement, the sharing economy, and other factors have made it increasingly difficult to define what a retailer is and does. Non-traditional retailers are developing new business models to serve customer needs, such as subscription services and flash-sales
  • On-demand shopping and fulfilment. Relevancy will be determined by the ability of retailers to meet the on-demand mindset of the modern consumer
  • Exponential living. Exponential technologies, like artificial intelligence, robotics and virtual reality are changing how we live and how we shop.

“Over the last 20 years we have seen a seismic shift in retail and the customers that retailers serve,” says White. “We are living an era where customers are in the driver’s seat more than ever before and they crave authenticity, newness, convenience, and creativity. We are living in the customer-driven economy.”

Global highlights

  • The Top 250 global retailers generated aggregated revenues of US$4.3 trillion in FY2015. To earn a spot on the Top 250 list required a minimum FY2015 revenue of US$3.5 billion
  • Retail revenue increased for 192 of the world’s 250 largest retailers, resulting in a currency-adjusted composite growth rate of 5.2% (compared to 4.3% in 2014)
  • Two-thirds of the Top 250 retailers operated outside their home country borders. On average, they had retail operations in more than 10 countries ansd derived nearly one-quarter of their composite retail revenue from foreign operations
  • Amazon, ranked 10th, is the number one e-retailer globally, followed by JD.com, Apple and Walmart. In FY2015, 80% of the 50 largest e-retailers (40 companies) were Top 250 companies.

About the Global Powers of Retailing 2017 report

The Global Powers of Retailing 2017 report identifies the 250 largest retailers around the world based on publicly available data for fiscal year 2015 (encompassing companies’ fiscal years ended through June 2016) and analyses their performance based on geographic region, primary product sector, e-commerce activity and other factors. It also reviews the world’s 50 largest e-retailers, provides an outlook for the global economy and an analysis of market capitalization in the retail industry.

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