Luxury brands look to Australia: 50 different retailers are considering expanding Down Under

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International luxury and premium brands are eyeing off Australia as a prosperous market, with experts believing the local luxury goods market could become more similar to Europe’s in the coming years.

Real estate firm CBRE said in a recent trip to Asia the company spoke to 50 different “luxury and premium international brands” that were all looking to expand into the Australian market.

“Australia’s attractive macroeconomic conditions have cemented it as a compelling destination for international retailers, from both a new entry and existing expansion perspective,” CRBE’s senior research manager Danny Lee said in a statement.

“Australia also has a relatively low international brand penetration rate — 30% in comparison to the 45% plus in Singapore, Hong Kong and the UK.”

One of the brands set to open up a store in Sydney’s CBD is Swedish fashion and accessories retailer ACNE, but CBRE was tight lipped on the 49 other potential entrants.

Australia has seen a number of international retailers grace its shores in the past year, including big international players such as JD Sports and smaller fashion retailers like Rag and Bone, which opened a store in Melbourne’s CBD last month.

However, luxury brands have overall been slow to approach the Australian market, which retail expert and academic at Queensland University of Technology’s Business School Gary Mortimer believes is due to the country being “geographically displaced” from the rest of the world.

“This means it has taken global brands, and in particular luxury global brands, some time to come Down Under,” Mortimer tells SmartCompany.

“In the last 15 years, we’ve started to see these brands appear and invest in real estate, with one of the first ones being Tiffany and then other brands like Burberry and Hugo Boss followed.”

Luxury brands are moving away from their “core markets”, believes Mortimer, as they became too saturated with competing premium brands and were forced to move into “emerging markets” such as Australia.

Mortimer notes that due to Australia’s comparatively small population the market for luxury goods remains quite small, but “still quite profitable” thanks to the typical buyers of those products not being financially constrained.

“Though it’s still a small market, it’s a viable market as there’s a hunger for luxury goods in Australia,” he says.

“Luxury goods retailers are protected from economic instability and low consumer confidence levels unlike mid tier fashion brands such as Myer. They’re targeting their products at the middle market, and those people are sensitive to things like interest rate levels, job losses, and consumer confidence.”

“But if your target market is looking to buy a $4,000 luxury suit, they’re unlikely to be affected by those things.”

For luxury brands already operating Down Under, Mortimer says the effects won’t be felt in the next few years, but warns the market could become akin to the European luxury goods market, with “dozens” of global luxury retailers making waves.

“We’ll start to see some real competition in the market, and as the market starts to thin, there’ll be less and less shoppers to go around.”

By Dominic Powell Courtesy Smart Company

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