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Retailers undeterred by e-commerce

News, 24 March 2016

HONG KONG/LOS ANGELES: The rise of e-commerce will not deter global retailers from expanding their physical presence in Asia, according to a new study of more than 150 major international brands.

Despite much-publicised concerns about economic slowdown in China, real estate firm CBRE found that the country remains the top retail market in Asia-Pacific and the fourth most popular in the world.

More than a quarter of global retailers (27%) reported that they are looking to expand in China while a similar proportion (24%) intend to expand in Hong Kong, which is ranked as the sixth most popular market worldwide.

Other countries in the region are also highly valued with 22% of global retailers expecting to expand in Japan, the seventh top retail destination in the world, and another 21% in Singapore, the ninth top retail location.

Although European countries dominate for retail expansion – Germany is top with (35%), followed by France (33%) and the UK (29%) – CBRE said that interest across Southeast Asia surged by more than double that of the previous year.

Retail brands continue to harbour concerns about rising real estate costs (56%) and uncertain economic prospects (42%), but the report emphasised that Hong Kong remains a desirable market despite the recent slowdown.

"We're seeing more of a challenging economic environment, and concerns such as high operating costs and a lack of quality space means retailers are somewhat more wary this year," said Dr Henry Chin, head of research at CBRE Asia Pacific.

"However, even as markets such Hong Kong and China are seeing a slowdown, we see increasing numbers of opportunistic retailers looking to enter markets like Hong Kong, supported by strong underlying consumer demand.

"Japan and Australia remain attractive, while Southeast Asia showed strong growth due to opportunities for retailers around an expanding middle class and stronger economic growth."

The study went on to reveal that a full 83% of retail brands believe their physical store expansion plans for 2016 will not be affected by the growth of e-commerce.

Indeed, almost one-in-five (17%) have ambitions to open more than 40 stores, while two-thirds (67%) are looking to open up to 20.

"A physical store presence in key locations is still critical to the strength of a brand's image," said Joel Stephen, a senior director at CBRE Asia Pacific.

"Stores still need to create an emotional affinity with shoppers, and customers still feel a need to go into stores, to physically touch a product and enjoy the feel-good factor associated with a particular brand experience," he added.

Data sourced from CBRE; additional content by Warc staff