World’s biggest retailers and Asia expansion

In our Asia Pac region, Australia has been a shining light during the GFC and, while New Zealand has been faring a little worse, it is still performing far better than North America, Western Europe and the large Asian economies.

When the US caught a cold late last year the belief was that Asia, the powerhouse that delivers new and innovative products to shelves in retail, would contract the flu and for a while it looked like it would, with mass redundancies and plant closures all over the news.

Well, as we run up to the Christmas “holiday season”, to use the politically correct North American parlance, around the Western world inventory levels are high and factories are buzzing again.

Given the fact – and it is fact – that we live in one global village, this increase in demand for products in US, Canadian, Greek shops, feeds directly into wage packets in China, Myanmar and Thailand, thus increasing the need to consume within the shops in those markets.

Well, now that we’re through the worst of it, some of the world’s largest retailers have now ramped up reinvestment in store expansion. Between Tesco, the largest UK based global retailer, and Walmart, the world’s largest retailer, we can see indicators of their confidence, in these key markets on our doorstep.

This week two key announcements have been noteworthy. Tesco announced continuing expansion in China with a joint venture agreement to open three shopping malls in China: Anshan, Fushan and Qinhuangdao, each of which includes a Tesco hypermarket as the anchor tenant. These hypermarkets are the biggest category creep models out there in retail land at the moment, retailing everything from bread to flat screen TVs.

The announcement highlights – more importantly, reignites – Tesco’s long-term investment strategy in China, with these three new openings taking to 18 the number of new hypermarkets they have opened in China over a 12 month period. Its total investment in space is now almost six million square feet.

Over at Wal-Mart, while US growth rates are strong – and in marked contrast to its fellow retailers in the GFC-torn US retail space – global expansion, with China a key plank, remains front of mind. International sales have increased 1.6% over the last reported period.

In recent commentary, Walmart’s President of the international division Doug McMillon said: “I’ve recently returned from visits to Japan, China and the United Kingdom, where I saw some of the best price communication I’ve ever seen. In an environment where price is top of mind for our customers, we are communicating value.”

Wal-Mart opened 10 stores in the world’s most populous nation in Q3, taking it to a total of 266 outlets there, and McMillan argued: “What I saw in China just magnified the opportunity we have in this fast-growing economy.”

So why is this important to us in Oz and NZ?

Well, firstly, within Walmart’s international division alone there are 720,000 employees. In Asia Pac, we in Australia and New Zealand are sources of very well trained hard-working managers and execs, working for retailers and manufacturers. The personal opportunity available to us “locals”, as a pool of high calibre resources is not lost on our US and UK based friends.

Secondly, when Tesco or Walmart range a new product and it works… hang on to your hat! Their appetites for stock are voracious. As the Asia Pac markets continue to develop, we in Oz and NZ are very well placed to develop and deliver innovative products that are spot on for Asian shoppers.

Now a declared interest. I am working with a mate to shape an offering into China alone, that if picked up by either Walmart or Tesco would equate to the total annual demand of a similar product in our ANZ market in its entirety.

If it comes off, I may stop writing blogs!

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In his role as CEO of CROSSMARK, Kevin Moore looks at the world of retailing from grocery to pharmacy, bottle shops to car dealers, corner store to department stores. In this insightful blog, Kevin covers retail news, ideas, companies and emerging opportunities in Australia, NZ, the US and Europe. His international career in sales and marketing has seen him responsible for business in over 40 countries, which has earned him grey hair and a wealth of expertise in international retailers and brands. CROSSMARK Asia Pacific is Australasia’s largest provider of retail marketing services, consulting to and servicing some of Australasia’s biggest retailers and manufacturers.