Europe is 2012 top retailer hotspot for branch expansion

LONDON | Retailers’ plans for growth in 2012 largely focus on opening stores in countries where they already have a presence. Italy leads the way as the most sought country for retailer expansion moving up from eighth place in last year’s rankings. Italy is followed by Germany, Russia, Spain and France, to make up the top five 2012 retailer hotspots, with more than 30% of retailers targeting each country.

Although consumer environment is challenging and an increasing share of shopping is being done on line, large scale expansion is still on the agenda for international retailers next year, according to new research from CBRE

Nearly three quarters of international retailers (71%) are planning to open more than five stores in the Europe, Middle East and Africa (EMEA) region by the end of 2012, with 20% of retailers looking to open 40 stores or more in 2012 compared to 18% in 2011.

Peter Gold, Head of Cross-Border Retail – EMEA, CBRE, said:

“The eurozone crisis has affected investment decisions in all industries, with retail no exception; however, this has not stopped retailers seeking new opportunities in 2012.

“While economic uncertainty persists, occupier demand remains firmly focused on prime retail space and there is little evidence that this will extend to more secondary locations. With virtually no vacancy in prime retail locations, and little new development, the challenge for many retailers is accessing the space they require.”

In recent years, retailers have focused on Germany, the United Kingdom, France and Spain, but many are now searching for new opportunities. Although the prospect for consumer spending growth in Italy is modest, there is a clear opportunity for retailers to expand into a market that is under-represented in terms of international brands and where a considerable amount of new retail development is taking place. Germany’s relatively strong economy continues to attract new retailers, while Russia has moved up from sixth position to third on the back of a strong economy and the prospect of further growth in consumer spending.

The Middle Eastern markets of Saudi Arabia, Kuwait and Qatar have also seen a significant increase in retailer interest compared to last year, with 15% or more of the surveyed retailers targeting these countries in 2012. High levels of wealth, more robust economies than those in Europe, and a relative lack of international brands are proving an attractive combination for retailers looking to grow their businesses. New shopping centre development is also allowing retailers to realise their expansion ambitions.

Although retailers have been targeting a wide variety of markets they are still seeking to minimise risk. More than half of retailers (52%) are aiming to open stores in new cities, but in markets in which they already have a presence. The number of retailers planning to open additional stores in existing cities is also up from 9% last year to 17% this year.

Online shopping remains high on the agenda for retailers. While acknowledging that the multi-channel approach is the best way to maximise sales potential, it is the online retail platform that will grow most quickly in coming years, with three quarters of retailers planning to increase their transactional capability in 2012. CBRE research reveals that 43% of retailers plan to significantly increase their online product coverage in 2012 and 28% plan to significantly increase the geographical coverage of their transactional capability.

Peter Gold, Head of Cross-Border Retail – EMEA, CBRE, added:

“…online shopping has allowed retailers to test demand in a new country first, before committing to a physical store. Consequently, an increasing number of retailers are just as happy crossing borders as they are developing their brand in countries where they already have a presence.”

* The original research paper is available here.

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