Luxury retailers target Australia
Overseas luxury retailers are looking to Australia as Asian markets reach ‘saturation point’, according to a new report released by CBRE.
The report, The Future of Luxury Retail in Asia Pacific, states the penetration rate of luxury retail in Australia is 50 per cent.
“Australia, unlike much of Asia, is far from saturation point in terms of luxury retailing,” said head of retail tenant representation Australia, Tim Starling.
In 2014, a total of 16 luxury retailers entered Australia or opened their first stand-alone store in five cities – double the total in 2012 and 2013 combined. The report found Australia offers significant opportunities for luxury retailers at a time when the Asian market is reaching saturation point.
Most major luxury retailers are now well established in Asia Pacific with China and Hong Kong being two of the most penetrated markets at 89 per cent and 81 per cent. Following several years of rapid expansion, these markets are approaching saturation point and several luxury brands have halted expansion amid sluggish sales.
“At present we are witnessing the largest influx of new luxury brands in the country’s history. This is coming from two distinct sectors, with fashion/ready to wear and jewellery retailers being the most inquisitive,” said Starling. The influx is being driven by larger groups such as LVMH, Kering Group and Richemont, however brands such as Valentino and Moncler also ‘had Australia on the radar’ said Starling.
“Another trend we are witnessing involves brands being more willing to seek space in shopping centre environments,” Staring said. “This was previously a ‘no no’ for many of the new brands looking to enter the market. However, new development activity is giving landlords the ability to create successful ‘luxury quarters’, with Chadstone in Melbourne being the best example of this in Australia.”
An increase in Chinese tourist arrivals was helping to support the luxury retail sector in Australia, particularly in light of the fall in the $AU dollar, says CBRE national director, retail services, Alistair Palmer. The new luxury precinct is poised to open Pacific Fair on the Gold Coast in 2016, while Chadstone was planning to double its luxury offer.
“Sydney Airport is also establishing a new luxury precinct, with many of the tier one and affordable luxury brands opening in order to capture the Asian tourist market,” said Palmer.
Often referred to as bridge brands, affordable luxury retailers – for example Michael Kors – provide high quality branded goods at a lower price tag than top-tier luxury retailers. Palmer says affordable luxury brands were increasingly targeting Australia, including the likes of Kate Spade, Michael Korrs, Coach, Furla, with Tory Burch expected to open in Australia in the future.
As of 2014, Asia Pacific was home to 807 million people aged below 14, representing more than 20 per cent of the total population. The emergence of luxury childrens wear brands has been welcomed by landlords as many of them are looking to expand their offering into toys, bookstores and playrooms in order to attract and retain foot traffic amid competition from online retail.
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