This is an exclusive preview from Ragtrader's print edition. To read more exclusive reports and analysis, head here.

The last time Converse launched a stand-alone store in Australia was 2011.

As part of a rollout through its distributor Conquest Sports, the brand is now set to open seven new stores in three months across Victoria and Auckland.

While the business is remaining tight-lipped about the rollout, it’s not the only international brand to go beyond distribution and pursue a vertical retail strategy in Australia.

UK fashion retailer Reiss made its foray into the market earlier this year, forging a distribution partnership with David Jones and launching two standalone stores in Melbourne.

The company’s CEO David Reiss says that the retailer now has its sights set on further expansion into Sydney.

“We are keen to secure a stand-alone store in Sydney soon and as a business we are always on the lookout for the right opportunities and locations, so should the right space present itself we will definitely look to further expansion.”

Reiss believes its alliance with David Jones has allowed the brand to scope out opportunity in the market and gage how Australians interact with its product.

“Our business with David Jones is a good indicator of where in the country we see real demand and we will react to this by looking at further investment in standalone stores where the demand is high.”

Reiss says that burgeoning demand for the brand online gave him an indication that the time to strike Australia is now.

“Our online business provides us with a great opportunity to test the waters in forthcoming markets. We found a growing appetite for the brand online, so opening Australian stores was a natural progression for us. We have also launched a market specific website this year. This combined with approaches from key partners allowed us to truly identify demand in the region.”

Despite launching a localised ecommerce business, Reiss explains why the business has launched bricks-and-mortar stores, particularly in an increasingly competitive environment.

“Stores allow the ultimate customer immersion within the world of Reiss; where they can experience first-hand the tailoring, craftsmanship and textures that are fundamental to Reiss designs. We take a highly multi-channel approach and storytelling is at the heart of everything we do. Own stores also ensure direct engagement with and immediate feedback from our Australian customers.”

Luxury footwear brand Pretty Ballerinas is also hot on the tail of vertical integration into the market.

After launching its first store in Westfield Sydney last year, it has since extended its reach to a second site at Chatswood Chase.

Pretty Ballerinas COO Nina Gai-Till says that there are major benefits for international retailers setting up shop in Australia with one being cost.

“With an ambitious implementation strategy to roll out a defined number of stores, it is essential to control as many logistical elements as possible, from the ground up.

“Also, it makes great financial sense to go the vertical integration route as it is easier to manage costs.”

Gai-Till explains how market research and conditions in the global retail environment determined the brand’s expansion into the region.

“Our organisation spent two years exploring all aspects of the market, constantly developing and reviewing business models, market strategies and redefining our demographics, before entering the market.

“As the retail industry had been negatively impacted by the GFC, and taking into account changes in the way luxury fashion is purchased, we felt it imperative to really delve into every aspect of how we expected to integrate into Australia and New Zealand.”

So what makes Australia an attractive new market for vertical integration? The answer is largely due to the influx of tourism from our neighbours.

“It is fascinating to see how much the Asian tourist impacts sales in central CBD locations,” Gai-Till says.

“We were also enchanted to discover how incredibly fashion forward our Australian and New Zealand customers are, particularly within a broadened age group. Also, the focus on health and leisure works very well for our brand of ballerina flats.

“We find that the market itself is very flexible in terms of implementing branding strategies, and that there is a strong purchase ethic dedicated to quality goods.”

The next move will be in Victoria.

“We are very pleased with how Pretty Ballerinas has taken off, and we are excited to continue rolling out our new stores, with the next one opening in Chadstone in Melbourne in November 2016.”

Like Reiss, Pretty Ballerinas continues to strengthen its distribution partnerships in the market but as Gai-Till says there is no better way to cement brand value than having dedicated retail sites.

“The stores themselves are designed to reflect the elegance of the brand, with key elements such as pale pink walls, extravagant old-world gold mirrors, and of course, our signature leopard ottomans.

“Pretty Ballerinas staff are extremely knowledgeable about the history of the company, and about every single model and style in the stores.

“Each season, we host training seminars to introduce fresh materials, models and styles, as well as to discuss anything new regarding sales and marketing strategies.

“Most of all, we encourage our staff to develop positive, helpful relationships with our customers, because people tend to fall in love with the brand and we want to ensure that our customers know how important they are to the company.”

As Converse executes its initial rollout across Australia and New Zealand, Deloitte national leader of retail, wholesale and distribution David White believes that data derived from ecommerce sales will drive more global brands to the market.

“Australia continues to be a very attractive market for international brands.

“A number of these international brands have first tested the Australian market through online to help establish the levels of interest for their products and to help build up a better profile of the Australian consumer.

“However, around 90% of retail sales in Australia are made via bricks and mortar stores so if international brands want to develop a significant footprint in the Australian retail market then they will likely need to have a physical presence.”

White is also quick to stress the financial merits of a vertical model.

“Selling direct to customers rather than wholesale through distributors typically generates higher margins.

“It also allows the retailer to have a much stronger control over its brand, which is particularly relevant when first entering a new market such as Australia.

“Another significant advantage of selling through its own stores is that it provides direct access to customers which allows them greater feedback on their brand, product and shopping experience.”

So what about the hurdles?

From an analyst’s perspective, White flags real estate as a major challenge.

“One of the key challenges is real estate.

“With the influx of international brands to Australia and the continued expansion of existing retailers, the demand for premium locations in CBD areas is very strong currently.

“This has implications both in terms of costs, and also the speed at which companies can both enter the market and expand across the country.

“A further challenge is the cost structure in Australia. Aside from inventory, the two largest costs for a retailer are typically rental and labour costs.

“However, these costs are typically higher than in many other developed international retail markets, and therefore the return on investment profile is often quite different to their domestic market.

“Gaining scale in the Australian market is also critical to making the investment profitable.”

White believes that if global brands approach Australia strategically, our proximity to Asia could offer leverage to their business.

“With Australia’s geographic proximity to south east Asia, it’s also an attractive market for global retailers wishing to use Australia as a base and springboard into the faster growing markets in Asia.”

There are still only 39 of the top 250 international retailers operating in Australia – with this number predicted to grow.

Reflecting on the the opportunities and challenges of launching operations in the retail landscape, Gai-Till believes there are inevitabilities which can be tackled with a bold vision and clear strategy.

“Integrating a new market is always an adventure. Whether you are simply creating a single store for an existing product line or importing a complete logistics chain from design and manufacture to the ultimate sales outlets, the challenges are the same.

“It is essential, above all, to know your market, do your research, constantly be on the lookout for ways to embellish your brand presence - and all that lies behind it - within the unique environment of your new market.”

comments powered by Disqus