Inside Retail: “Reignited appetite”: Why retailers are seeking greener pastures overseas

The original article which appeared on insideretail.com.au is available here.

written by Aron Lewis

During the years affected by Covid-19 pandemic restrictions, when freedom of movement was restricted, Australian retailers redoubled their efforts to consolidate their position in the local market.

But, following the opening of international borders, it appears that more businesses are expanding their horizons, and are looking for ways to reach new markets and audiences.

According to HSBC research, more than half of Australian mid-size companies are planning to expand offshore in 2023, and enter at least one new foreign market.

Retailers are no exception to this, with a growing number identifying global opportunities. But, with consumers facing rising inflation and cost of living pressures across the world, the stakes for international expansion are high.

One business that is continuing to expand its global footprint is Toys “R” Us. The company is returning to key markets such as the US and the UK as part of its medium-term goal of achieving five per cent market share penetration in the toys, baby and hobby markets across all licensed regions.

The brand recorded an EBITDA loss of $6.7 million over HY23, which included non-recurring costs associated with overseas expansion – such as costs involved in setting up in the UK.

Toys “R” Us Australia CEO and managing director Dr. Louis Mittoni  told Inside Retail that the past 12 months had been “interesting.” Following a pandemic-driven elevation in retail and online sales in the second half of the 2021 calendar year, he observed that the world was faced with war, global insecurity, inflation and economic uncertainty as freedom of travel and movement started to ramp up. 

“Our B2B operations have reliably served as a litmus test of the wider market, serving hundreds of wholesale customers. [It’s] indicative of how retail and online in particular are performing,” Mittoni said. 

“The momentum behind the Toys “R” Us brand and its return to key markets including the UK and United States has been phenomenal.  Regardless, we will exercise caution and prudence regarding our expansion plans in the short term.”

However, he identified that there were immense opportunities for business managers, if they are able to strategically navigate their way through challenging and uncertain economic times.

“The right type of expansion is still possible and can be highly profitable in 24 to 36 months’ time,” he said.

Success on a global scale

Another organisation that is expanding its global footprint is Australian fashion label Rebecca Vallance.

Its eponymous creative director and founder said that the past year had been a big one for domestic and international growth, with the brand soon to be stocked in Selfridges in London, where it will launch with an exclusive capsule collection.

It is also looking to expand its bricks-and-mortar retail outlets in London and New York, with international retail rollout scheduled for 2024.

Vallance said that the brand is endeavouring to accommodate customers across the northern and southern hemisphere, while also supporting and nurturing its relationships with wholesalers,  as it continues to expand on a global scale.

It intends to establish separate websites later this year, which are designed and marketed to a different audience, in accordance with demand and opposite weather seasons. 

She added that the fashion industry was heavily impacted by Covid-19, but it provided the label with an opportunity to reevaluate its plans and strategies. 

“As a brand, we did pivot during this time [and put] our expansion plans on hold,” Vallance said. “However, in a post Covid-19 world, we are seeing a return to celebrating occasions [and] reigniting our appetite to continue to expand overseas.”

Regarding current cost of living challenges, she explained that customers are still supporting brands they love, but the items they spend their money on must be well worth the investment.

“Rebecca Vallance continues to grow globally, after seeing a vast growth in the US and European market,” she said. 

“It is exciting for an Australian brand to have ongoing success on a global scale.”

Positive perception

Robert Reid, senior strategist at retail consultancy firm RetailOasis, noted that Australia is a relatively small, and increasingly competitive market, and that labour and supply costs can be significantly higher than overseas.

“It’s become easier for retailers to expand internationally due to the increased accessibility to international markets. [For example] many retailers further developed their e-commerce and technology infrastructure during the Covid-19 [pandemic],” Reid said.

“Australian brands, particularly in food and beauty categories, are [also]  perceived to be high quality at an international level. [It] makes international expansion easier if the host country has a positive perception of the country of origin.”

While Reid believes that rising cost of living is, and will be, an ongoing issue for customer confidence and discretionary spending across Australia. He said that certain international markets might be less affected.