US, the retailers’ favourite but also toughest to crack

With a stagnated domestic market the number of retailers looking to expand and seek out growth overseas in order to offset weaker UK sales has never been greater.

Britain may be home to what many consider to be one of the best shopping capitals in the world but with domestic growth harder to achieve, due to saturation and consumer maturity, more indigenous brands are seeking expansion internationally.

Nearly half of British retailers (46 per cent) believe the USA remains the hardest market in which to achieve commercial success despite being the current destination of choice, according to new research from Barclays, entitled The Global High Street – Opportunities for Retail.

The survey questioned retailers on their attitudes towards international expansion and how they plan to expand, for example, via online channels, opening stores or joint ventures.

It found that the USA remains the top choice and comes as reports surface that Sir Philip Green hopes to turn Topshop into a $1bn US business within the next five years.

However, retailers also consider the USA to be the most challenging market, despite the growth of online which provides a low-cost means of entry and the seemingly similar cultures and values shared by British and American consumers.

China came in second with around a third of retailers (33 per cent) saying they had experienced difficulties when trying to set up shop. Asia, more widely, was third with 19 per cent of those retailers questioned claiming they had experienced difficulties.

Asked about future expansion, nearly a quarter (23 per cent) of retailers said Germany was their number one choice for overseas expansion in the next five years, closely followed by China and Australia. Richard Lowe, Head of Retail & Wholesale at Barclays, said: “On the surface the USA would appear to be an easy market in which to secure a foothold but its sheer scale means achieving commercial success across the whole country is an incredible feat. As for China, nothing is impossible but, everything is difficult.”

It is clear to see why retailers are keen to explore opportunities overseas. Between 2012 and 2016 total UK retail spend is expected to grow by around 11.5 per cent to £345.6bn. In the USA this figure is nearer 17.5 per cent (to £2.3 trillion by 2016) and in China this figure is an overwhelming 85 per cent (to £3.6 trillion by 2016), the highest in the world. Russia and Brazil also enjoy standout growth predictions over the next five years with 68 per cent (£649.8bn), and 49 per cent (£536bn) respectively.

Africa remains one of the final frontiers for retail and the recent acquisition of South Africa’s Massmart shows how seriously global retailers are now taking the continent. Nearly a quarter of retailers surveyed stated that Africa will be the new retail growth story within a decade, with first mover advantage (33 per cent) considered to be the most important consideration when expanding.

n Contact Debbie Mullen or Chris Forrest, co-heads of Yorkshire on 0113 2963041 or for a copy of the full report, please visit www.barclays.com/corporatebanking