The US remains the hardest market for UK retailers to break into despite its position as the top destination of choice for overseas expansion, according to a survey released today.
Questioning retailers on their views on international expansion, the survey by financial services provider Barclays carried out by analyst firm Conlumino found that the US remains the top choice for growth despite 46 per cent of retailers stating that it remains “the hardest market in which to achieve commercial success”.
Following news last month that Sir Philip Green intends to transform Topshop into a billion-dollar business in the US within five years while fashion retailer Hobbs is also set for growth in the country, America has maintained its position as the ultimate target for growth though retailers consider the crowded market the most challenging.
Despite the significant popularity of e-commerce among American consumers, which allows for low-cost entry into the market as well as a way to showcase the similar cultures and values shared by US and British shoppers, UK retailers remain fearful of the difficulties involved in building a US presence.
Expansion in China is also a stumbling block for retailers, according to the survey, with 33 per cent of retailers struggling to gain a strong footing while Asia came third with 19 per cent of retailers acknowledging the problems involved in entering the market.
“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,” explained Barclays Head of Retail & Wholesale Richard Lowe.
“As for China, nothing is impossible but, everything is difficult.”
Such results are surprising given the increasing focus on China and Asia in recent months as the likes of New Look and Spar open stores while Tesco is to launch its online offer in China in the coming months, as 33 per cent of retailers said they planned to expand in the digital space to reduce costs.
Exploring overseas opportunities is key to retailers’ success, as total retail spend abroad continues to exceed the UK.
While total UK retail spend is forecast to rise 11.5 per cent between 2012 and 2016 to £345.6 billion, US spend is expected to grow 17.5 per cent to £2.3 trillion while Chinese spend will reach £3.6 trillion by 2016, up 85 per cent and the highest spend in the world.
Lowe said: “It would be unreasonable to say there is no further growth in domestic markets, but it is becoming increasingly difficult to extract in the current climate.
“The economic realities across the western world mean that retailers now have international expansion firmly on their radar.”
Africa continues to lag behind its international counterparts as “remains one of the final frontiers for retail”, according to Barclays, though nearly a quarter of respondents expect the continent to be the new retail growth story over the coming decade.
Although only 21 per cent of retailers currently generate sales in Africa, more than half of those named South Africa s their top market and the country is the number one choice for expansion in the region with 18 per cent.
“Many of the trends which have driven the economic development of emerging economies in Asia and South America are beginning to take hold in Africa,” Lowe noted.
“Its rapidly expanding middle class increasingly need goods and services which cannot be catered for domestically, providing a golden opportunity for internationally-minded retailers.
“This is a truly ‘ground floor’ moment in many African economies.”