International growth remains a priority for retailers

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Very few retailers today can boast a slot on the global retail rankings without in fact having an international presence.

Very few retailers today can boast a slot on the global retail rankings without in fact having an international presence. Indeed, the only major players left with a single-country presence are primarily US-based.

Some single-country retailers on the list have retreated because of past failures abroad (eg, Sainsbury’s and Edeka) while others are almost certainly future acquisition targets (eg, Rite Aid) or are finally on the brink of international expansion themselves (eg, Target or Morrisons via Kiddicare).

So for the majority of successful retailers, international remains a priority particularly to help offset sluggish growth in home markets such as the UK and US, which remain subdued at best.

And as we saw last week, even the resilient Asos had a reality check when it reported that UK sales rose by a mere 1%, a far cry from the normal double-digit growth we’re used to seeing from it. Asos’s international sales meanwhile continued to grow in excess of 100%.

But that’s not to say that international growth should come at the expense of domestic performance. In fact, the golden rule for any expansion overseas is that a strong home market must first be well established.

That’s why it’s shocking to hear how retailers like Gap plan to triple their store count in China at a time when their North American segment, which still accounts for 80% of the business, suffers from declining sales and profits.

To a certain degree, it is a sign of the times. Planet Retail predicts that China will overtake the US to become the world’s largest retail market within the next five years. At the same time, Gap is over-represented in its home market where a combination of sluggish demand, tougher competition and the migration away from bricks-and-mortar and towards the internet has diluted its appeal.

Sound familiar? Other mid-market players like Mothercare are suffering from the same issues. But all is not lost; both Gap and Mothercare can still exist in their respective home markets, but with a more streamlined store base supported by a stronger ecommerce offering and – you guessed it – a successful international division.