More international retailers to target Australian market in 2016
- 39 of the world’s top 250 retailers now operate in Australia
- Woolworths and Wesfarmers retain placings amongst top 25 global retailers
- China – the hidden giant?
- Digital divide to challenge retail industry.
20 January 2016: Thirty-nine of the world’s top 250 retailers now operate in Australia, up two from last year, according to the 2016 Global Powers of Retailing report from Deloitte. And Australia is set for further international retailers to enter its retail market in 2016. The 19th edition of this annual Deloitte report identifies the 250 largest retailers globally by revenue and examines current global trends and economic prospects in retail.
Dufry AG’s appearance in the list of 39 retailers operating in Australia resulted from its acquisition of The Nuance Group in 2014. The company operated the Sydney and Melbourne Airport concession stores during the period under the report’s review, although the Sydney Airport contract is now handled by German duty free operator Heinemann. Hermes has had an Australian presence for a number of years, but has broken into the Top 250 this year.
“The Australian market remains relatively unsaturated by the world’s largest retail brands compared to the US and European markets,” said David White, partner and national leader of Deloitte’s Retail, Wholesale & Distribution Group. “In the last quarter of 2015 we learnt South African retailer Steinhoff had secured a deal with UK department store Debenhams to sell a selection of its private label apparel through its Harris Scarfe stores. And, in its first venture outside of South Africa, Mr Price has entered the Australian fast-fashion market, branded MRP, with two stores in Melbourne.”
Whilst new global retailers look to Australian shores, those already here continue to expand their operations. Capitalising on the strong demand for household goods, Inditex brought another of its brands, Zara Home, to Australia in 2015, with further store roll outs planned for 2016. Meanwhile Sephora and US retailer Williams-Sonoma are both set to continue their store expansion programs in 2016.
White continued: “With just 16% of the world’s top 250 retailers currently operating in Australia, coupled with a relatively stable economy, significant discretionary spend and strong consumer demand for international brands and products, we can expect further disruption in the market with new entrants highly likely. Australian retailers will need to be vigilant in ensuring they are differentiating themselves from their competitors by offering the right product range and mix and delivering a service, in-store and online, that meets their customers’ expectations.”
Woolworths and Wesfarmers represent Australia in the Top 250
Woolworths and Wesfarmers continue to be the two retailers representing Australia in the Top 250, at 21st and 23rd respectively. Whilst these retailers’ rankings have slipped for a second consecutive year (from 18th and 22nd, respectively, versus last year), the decrease is primarily due to a circa 9% depreciation in the Australia dollar against the US dollar, rather than a contraction in revenues.
Awaiting the entrance of the dragon
With nearly half of the 39 Top 250 global retailers which operate in Australia based in the US, one country conspicuous by its absence is China. Whilst China has nine retailers in the Top 250, none currently operate in Australia.
“Many of the products we buy are manufactured in China, however unlike other sectors we have yet to see Chinese retailers entering the Australian market directly,” said White. “The growth in the middle classes in China is already prompting a surge in consumer demand and Chinese developed brands. It is only a matter of time before we see these emerging retailers expanding their businesses more globally, including Australia.
“The second largest Chinese retailer, JD.com, has made a number of strides into the Australian retail sector, launching a dedicated online Australian Mall in 2015 for products imported from Australia via its JD Worldwide platform. Numerous Australian companies have taken advantage of this platform to sell products into the Chinese market. Given the signing of the China-Australia Free Trade Agreement in 2015, further Chinese investment into Australia should be easier.”
The impact of digital technology
Global Powers of Retailing 2016 also highlights the impact of technology on in-store shopping, indicating the rapidly increasing digital connectivity of shoppers. Three important trends are identified:
- No single path toward digital adoption. While all markets are moving toward widespread digital adoption, some are taking somewhat different routes. Some emerging markets, for example, are entirely skipping adoption stages previously experienced by developed markets
- One digital ‘size’ does not fit all customers. Digital behaviour varies depending on demographic factors such as age and income, and also by the product type being sought
- Consumers are demanding better digital tools. Digital tools and channels can both extend a retailer's reach and increase revenue, but customers are currently feeling unsatisfied and underserved by many retailers’ current digital offerings.
“There is a gap between what consumers expect and what retailers are currently delivering in terms of the consumer’s evolving desire to incorporate digital into their in-store shopping experience,” said White. “Some retailers may underestimate the digital influence, while others recognise the real opportunity to capitalise on this ‘digital divide.’”
- The Top 250 global retailers generated aggregated revenues of US$4.5 trillion in fiscal year 2014. To earn a spot on the list required fiscal 2014 retail revenue of US$3.65 billion
- Four retailers generated retail revenue of more than US$100 billion
- Over 90% of the Top 250 were profitable in fiscal year 2014, albeit at a lower level of profitability. Against a bumpy economic backdrop, sales-weighted, currency-adjusted retail revenue grew 4.3% in 2014 for the Top 250, on a par with the 4.1% growth in 2013
- The European region, with 93 companies, continued to account for the largest share of the world’s Top 250 retailers in 2014. However, North America’s 87 companies averaged US$23 billion in retail revenue to maintain the largest share of Top 250 revenue
- Amazon, ranked 12th, is the number one e-tailer globally, followed by Apple, JD.com and Walmart. All but six of the Top 50 e-tailers (e-50) are based in the US (26 companies) or Europe (18). The majority of the e-50 (39 companies) are omnichannel with bricks-and-mortar stores as well as online and other non-store operations.
To download a copy of the report, please visit the 2016 Global Powers of Retailing webpage.
Companies were ranked by total revenue, not just retail sales. For purposes of this analysis, retail revenue includes royalties and franchising/licensing fees as well as wholesale sales to affiliated/member stores or other ‘controlled wholesale space’ operations (eg, in-store shops or identity corners).
About the 2016 Global Powers of Retailing report
The 2016 Global Powers of Retailing report identifies the 250 largest retailers around the world based on publicly available data for fiscal 2014 (encompassing companies’ fiscal years ended through June 2015) 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.
Back to the top.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/au/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 225,000 professionals, all committed to becoming the standard of excellence.
About Deloitte Australia
In Australia, the member firm is the Australian partnership of Deloitte Touche Tohmatsu. As one of Australia’s leading professional services firms, and winner of both the Australian Financial Review/CFO Audit Firm of the Year and Accounting Firm of the Year awards 2013, Deloitte Touche Tohmatsu and its affiliates provide audit, tax, consulting, and financial advisory services through approximately 6,000 people across the country. Focused on the creation of value and growth, and known as an employer of choice for innovative human resources programs, we are dedicated to helping our clients and our people excel. For more information, please visit Deloitte’s web site at www.deloitte.com.au.
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Touche Tohmatsu Limited
© 2016 Deloitte Touche Tohmatsu