John Lewis has unveiled a tie-up with department store group Myer to launch six shop-in-shops in Australia.
John Lewis is expected to open its first concession in Myer’s new Warringah store, on the outskirts of Sydney, before Christmas. Branches in Melbourne, Perth, Bondi, Chadstone and central Sydney will follow in early 2017.
Here are five reasons why Australia looks like a good market for the British department store chain to build upon its existing online service.
The economy is strong
Australia did not suffer the economic setback experienced by the rest of the developed world. While European, North American and Asian economies were all battered by the global slowdown in 2008, Australia did not go into recession.
That impressive performance has been consistent and the country is now in its 25th consecutive year of growth. Retail sales growth in Australia averaged 4.1% every year from 2008 to 2016.
Not every aspect of the Australian economy is flawless but successful performances from other international retailers show that it is possible to negotiate any problematic factors.
Australian research directors at property company Cushman & Wakefield, John Sears and Dominic Brown, point out: “Consumer confidence has tended to fluctuate around the neutral level for the past few years and other negatives include weak income growth, the end of the mining boom as well as ongoing global economic problems including slowing growth in China.
“Another potential problem for international retailers is Australia’s relatively high labour costs and slower income growth but recent successes show these can be overcome with the right offer.”
The Aussie market isn’t too crowded
According to Deloitte, only 39 of the world’s 250 largest retailers (16%) operate in Australia, meaning that there should be plenty of potential for international retailers to make their mark. Around 10 of those opened between 2012 and 2014 so John Lewis is entering the market at a good time - early enough to make an impression but after others have proved its viability.
Home grown talent is also less developed than on the ultra-competitive British high street. There are just two mainstream department stores, Myer and David Jones, and discount department stores such as Big W, Target and Kmart.
“There is definitely an opportunity for retail brands in Australia,” says CBRE EMEA retail head Andrew Phipps. “There is a still a lot of desire for overseas brands. The boom that was in place from Chinese businesses buying minerals from Australia has slowed a little so Perth and the west coast may be slightly more of a challenge but Melbourne, Sydney, Adelaide, Brisbane and the Gold coast are still growing strongly.”
John Lewis already has strong traction in Australia. John Lewis head of international development Katie Jordan says: “We already have a good customer base in Australia and it is in the top five countries for our online international sales.
“Our new physical presence will complement this and allow us to introduce the John Lewis brand to even more people.”
Both Debs and HoF said at the time of their launches that Australia was their biggest online market outside the UK.
Part of the popularity of British brands in Australia is a result of the strong pull of life Down Under for British expats. About 1.2m Britons live in Australia and their penchant for British brands travels well, according to the Sydney Morning Herald.
“UK retailers have a ready-made market in Australia,” one of the paper’s journalists wrote, maintaining that expats “are familiar with their brands and would rather buy clothing and accessories from the British chains than local department stores such as Myer, David Jones, Wesfarmers’ Target and Kmart and Woolworths’ BIG W”.
A smart business model
Part of John Lewis’s strategy is to launch shop-in-shops in overseas retailers’ stores. It has pursued that course since 2012, when it teamed up with South Korea’s Shinsegae department store chain.
It now has 21 shop-in-shops in places such as Holland, Singapore and the Philippines.
“It is a completely different kettle of fish to opening a store,” says Planet Retail’s David Gray. “You don’t need to enter the property market, which is a costly business and means you can’t get out of a country easily.
“The beauty of a third-party concession is that John Lewis gets to test the water and Myer gets the John Lewis brand in store, which may attract more customers.”
Sears and Brown agree. “Australia’s department store sector has been trying to reinvigorate itself for a number of years with limited success. Just as Aldi has been able to shake up the supermarket sector there may be an opportunity for John Lewis. Its proposed partnership with Myer gives John Lewis access to a large store network and Myer a pipeline of new product.”
“The Myer buyers know their market and select John Lewis products that appeal to their customers,” adds Jordan. “All of our international shop-in-shops offer the very best of John Lewis’s own brand products.”
Inbound and outbound tourism
Australia is a key tourist destination for Asian tourists and they bring soending power.
“Chinese tourists tend to favour urban destinations, which has helped prime retail strips in Sydney and Melbourne especially,” say Sears and Brown. “With the Australian dollar weakening over the past years, there is an expectation that this will support an increase in inbound tourism.”
Phipps adds that the demographic of Australian tourists that John Lewis will appeal to are “well-travelled and recognise and crave the brands they have seen on their travels”.
There is a compelling case for John Lewis opening in Australia. If it can pull off the venture with its usual aplomb then the retailer could soon be cracking open a tinnie to toast success.