A new study has found that retail global expansion has lost some steam, and while the United States remains the most active, Europe is now the preferred spot for expanding retailers, according to Chain Store Age.
The CBRE Group Inc.’s 10th annual study of international retail expansion surveyed 166 cities across 51 countries on how many international retailers had debuted in their markets last year. The results found that retailers’ expansion into new markets increased by 2 percent in 2016, down from 3.1 percent in CBRE’s 2015 study.
United States retailers were the most active by a wide margin, most likely due to the strength of the dollar compared to other currencies. Of all expansion at city level, 21 percent was by U.S. retailers, with Italian retailers coming in second at 12 percent.
“U.S. retailers’ expansion abroad is aided significantly by their strong brands and execution, especially for food and beverage operators,” said Brandon Famous, CBRE senior managing director and retail leader, the Americas. “The US retail market is relatively mature and somewhat crowded, so several American retailers instead are targeting Europe, Asia and the Middle East for much of their expansion into new markets.”
The report went on to explain that retailers’ adjustment to the growth of eCommerce and shifting exchange rates are behind the overall decline in global expansion.
“As eCommerce grows, retailers have become more deliberate and meticulous about how many stores they open and where they do so,” said Anthony Buono, chairman of CBRE’s global retail executive committee. “Their global expansion favors the tried-and-true global gateway markets where they get the most exposure for their brands and access to huge populations with disposable income.”
But while the U.S. is the leader of the pack, the study found that Europe is the preferred new destination for expanding retailers, with 43 percent of retailers’ global expansion into new cities in 2016 taking place there, up from 36 percent a year earlier. CBRE attributed this to the fact that European retailers now prefer to expand to countries within their home continent rather than in markets where currencies have become expensive, such as the United States.
Other key findings include coffee shops and restaurants as the hottest retail category for global expansion into new markets, with retailers in that category accounting for 22 percent of all expansion at city level.
And while Hong Kong remains the most popular destination for expanding retailers on the city level, Toronto was the only North American city to crack the top 10 most popular destinations for expanding retailers. New York City was the 27th most popular destination for expanding retailers, with 17 new entrants.