A new wave of international retailers will set up shop or take over local retail brands this year, according to Deloitte’s 2015 Global Powers of Retailing report.
The report identified Marks & Spencer as one brand closely eyeing the Australian market, with Chinese retailers another potential source of competition.
It noted 37 of the world's top 250 retailers are now operating in Australia. While there are eight Chinese companies in the top 250, none of them are currently in the market.
"With the growth in the middle classes in China and a rapidly growing domestic retail market, it’s only a matter of time before we see more Chinese retailers appear in the top 250—and, of course, their entrance into the Australian market," the report stated.
Seven new international retailers opened last year, including H&M, Uniqlo, Forever 21 and Sephora. This figure is compared to just two in 2013, which saw the entry of US brands Williams-Sonoma and Abercrombie & Fitch.
"With many global retailers continuing to face challenging domestic economic conditions, international expansion has remained a key growth strategy for many of the Top 250 retailers," the report noted.
"Nearly a quarter of the Top 250 Retail Revenues (24.3 per cent) came from foreign operations, with the Top 10 generating nearly one-third of their revenues from overseas operations.
"The Top 10 are the most global of all companies in the list with, on average, retail operations in 16.3 countries in 2012 compared with 10 countries for the Top 250.
"Interestingly, two of the five U.S. Top 10 companies had no international operations... a sign that there is potential for more international growth to come."
Acquisitions could also be another defining factor of the year, following several major acquisitions of Australian brands in 2014.
This included South African-based retailer Woolworths’ takeover of Australian department store David Jones, as well as the $6.7
billion global acquisition of Pepkor by Steinhoff Holdings.
"We are likely to see further interest by overseas retailers in underperforming Australian retail companies. If nothing else, 2014 has shown us that international retailers continue to see value in both the Australian retail market and Australian retailers themselves," Deloitte noted.
The Deloitte report found that nearly half of the top 250 retailers operating in Australia originate from the US, with apparel and footwear the largest category, closely followed by supermarkets.
The weakening dollar and ever increasing competitive pressures will continue to drive interest in the market.
"As major global players continue to enter the Australian market, and existing global retailers expand their store footprint, Australian retailers across all segments will continue to face significant challenges and increased competition."
The report noted now as the time for Australian retailers to consider international expansion.
"One avenue of growth for Australian retailers is to expand overseas. With its proximity to the emerging retail markets in Asia, Australia is well positioned to take advantage of the growing wealth in the region.
"The prospect of expanding overseas is not without its own risks but, as Australian retailers have experienced all too well over recent years, if executed well, the rewards of international expansion can be significant."
