>

Majority of brands undeterred by competition from online retail: CBRE

By Tan Chee Yuen

/ CBRE, The Edge Property |

March 28, 2016 12:00 PM SGT

Growing online sales will not deter retailers’ physical store expansion plans in 2016, says CBRE in a report released on March 22. This was based on a survey of over 150 major international brands in the Americas, Asia Pacific and Europe, the Middle East and Africa (EMEA) early this year.

Of the brands surveyed, 83% said their expansion plans were unaffected by the growth in e-commerce. Only 22% of retailers are concerned about online retail posing a threat to their business. Retailers are “quite cautiously optimistic” about physical sales network expansion. The findings show that 17% of the respondents are looking to open more than 40 stores in 2016 — up from 9% in 2015. The majority of respondents — 67% — plan to open up to 20 stores, says CBRE.

“A physical store presence in key locations is still critical to the strength of a brand’s image,” says Letty Lee, CBRE director of retail services.

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

One-fifth of the brands — largely from the Americas and EMEA — intend to expand into travel hubs this year, that is, airports and train stations, as these will give them access to high footfall in these busy locations. And, this looks like an emerging trend.

“Project Jewel at Changi Airport is Singapore’s answer to the growing appetite for brands to operate out of travel hubs,” says Lee.

China remains the top target market in Asia-Pacific and the fourth-most popular globally, with 27% of retailers looking to expand there. This is followed by Hong Kong in sixth position (24%), Japan in seventh (22%) and Singapore, ninth (21%).

Of the respondents who plan to open in Southeast Asia, Malaysia (10%), Indonesia (9%), Thailand (8%), Vietnam (8%) and the Philippines (8%) captured the attention of global retailers, says CBRE.

Some of the risks highlighted by the brands include the escalating cost of real estate (56%) and unclear economic prospects (42%). Retailers that originate from Asia- Pacific are most concerned about turnover rent clauses and changing consumer behaviour (40%) — a higher percentage than the global average of 31%.

“We’re seeing more of a challenging economic environment and concerns such as high operating costs and a lack of quality space mean retailers are somewhat more wary this year,” says Henry Chin, CBRE head of research for Asia-Pacific.

A woman holding an umbrella walks past a company logo of a Gucci boutique outside a

shopping mall amid rainfall in central Guangzhou, Guangdong province