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Retail Friday 29th April 2016

Aussie Rules

Aussie Rules

The £340m acquisition of Homebase by Australian retailer, Bunnings, has highlighted the migration of Aussie brands into the UK. We took a look at who’s arrived from Down Under and who may be on their way.

Bunnings may not yet be a familiar brand in the UK, but it soonwill be, following Australian Wesfarmers’ recent acquisition of the DIY retailer Homebase from Home Retail Group for £340m. The deal highlights the keenness of retailers down under to grow their business on UK shores. “Everyone is looking at other markets because the market is so saturated in Australia,” explains Tim Starling, Head of Retail Tenant Representation at CBRE in Sydney.

Unlike Bunnings though, most Australian retailers are likely to arrive in the UK via a less dramatic, phased programme of store openings rather than taking over an existing operation. Funky stationery brand Smiggle is one of the most high-profile and prolific entrants. This month, the retailer opened its fiftieth UK store, just two years after it first landed in London.

The company has ambitious growth plans, aiming for 100 stores by the end of 2016 (when it will match the number run by UK rival Paperchase) and 200 by 2020. “At the moment, the UK is our biggest growth business in terms of Smiggle as a brand. If a site doesn’t meet our criteria, we just won’t look at doing it,” Josh Molloy, Property General Group Manager of parent company Just Group told the market last autumn. “At the end of the day, we are here to do business in the top schemes and top centres and top high streets in the country.”

Loose tea specialist T2, which touched down in the UK in 2014, opening its first store in London’s trendy Shoreditch, isn’t planning on rapid growth like Smiggle, but now has 10 outlets in London and the South East. ”Their shops are different and beautifully done, something we stuffy British people are now starting to understand!” says David Purslow, Director of Harper Dennis Hobbs, who has sourced many of the UK locations for both Smiggle and T2. “They’re successful because they’ve come in with a great point of difference and have a lot of clout behind them [Premier Investments for Smiggle and Unilever for T2].”

Retail market observers who marvel at T2’s ability to sell tea to Brits as a modern-day example of selling coals to Newcastle, won’t be surprised to learn that more stores are in the pipeline. “I expect there will be up to 12 more in provincial high street and shopping centre locations,” reckons Purslow. “But it’s important not to saturate the market and maintain a position as a premium brand.”

London_Tarina_Fanning

Other Australian retailers with between one and a handful of stores in the UK, all of who are tipped as potential expansion candidates, include: Bailey Nelson (eyewear), Industrie (menswear), kikki.K (stationery), Lorna Jane
(activewear), Lovisa (jewellery), RM Williams (shoes) and Typo (stationery). The latter’s parent company is privately-owned fashion label Cotton On which is believed to have been looking at the UK for several years.

“For Australian brands looking for growth, particularly those that are listed and need to deliver value for shareholders, the UK and Europe provide a great opportunity,” notes Michael Bate, head of retail at Colliers International in Sydney.

However, extending operations to the other side of the world is challenging and many of the retailers mentioned have come to Europe after first building up a presence in New Zealand and then Asia. Bate comments: “The majority of manufacturing [for Aussie retailers] is done in Asia as logistics between Asia and Australia are relatively easy. Converting these logistics to European destinationscan present issues. The performance of the Australian Dollar against the Euro is another challenge in setting pricing policy.”

Within Europe, the UK is seen as a safe gateway and, with the exception of Lovisa, which debuted at Trinity Leeds, all recent retail arrivals from the land Down Under have opened their first outlets in London, even if that meant paying London prices. “They can get their heads around high rents, but they all find UK business rates really difficult to get to grips with,” reports Jerry White, London-based senior retail leasing and development director at CBRE.

Looking ahead, market experts suggest that the volume of new entrants will be a steady trickle rather than a Bondi-size wave. “I don’t think we’ll be inundated by Australian brands,” predicts HDH’s Purslow.

The direction of travel isn’t all one-way, though. Over the last two years, UK brands TM Lewin, Thomas Pink and Rhodes and Becket have set up store in Australia.

Driven by investor demands for growth, more are set to follow. Colliers’ Michael Bate confirms: “In the past 12 months, there has been a flurry of activity, with River Island, Hamleys and Debenhams, via their South African franchisee, all taking a serious look at the Australian market.”

Within Europe, the UK is seen as a safe gateway and, with the exception of Lovisa – which debuted at Trinity Leeds – all recent retail arrivals from the land Down Under have opened their first outlets in London

Coming to the UK high street? Australian retail brands to watch…

Honey Birdette – this Aussie version of Ann Summers, known locally as Honey B (geddit?) has been cheekily trading for a decade.

MJ Bale – the MJ stands for Matt Jensen, founder and CEO of the designer menswear label.

Scanlan Theodore – classy design house, with a 25-year track record.

Peter Alexander – commentators suggest this value fashion label could be the next Just Group brand to follow Smiggle, despite denials from the parent company.

sass & bide – the designer fashion label launched in 1999 by Sarah-Jane Clarke & Heidi Middleton, who began by selling bespoke denim on London’s Portobello Road, already has a UK online presence.

Zimmermann – founded in 1991 by the Zimmermann sisters, now offering a high-end fusion of swimwear and readyto-wear garments, with a handful of stores in the US.

Seed Heritage – born in 2000 as a childrenswear boutique, the retailer has since expanded into ladieswear, too.

Colette – brainchild of Colette Hayman, dubbed Australia’s ‘Queen of Accessories’, the brand is growing fast since starting up in 2010.

2xU – pronounced ‘two times you’, this performance sportswear brand has been up and running since 2004 and has a UK online presence.

Spotlight – an out-of-town discount retailer from the 1970s going strong in the new millennium.

Seafolly – another 1970s’ start-up, turned major-league swimwear brand.