When IKEA announced recently that it plans to open 25 stores in India and invest $1.9 billion euros over the next 15 - 20 years, it was not only significant for IKEA's global retail presence, it also marked a positive step for global retailers in India. If the Indian government's ever-changing policies for foreign retailers has flip-flopped enough to make expansion feasible for IKEA, then no doubt other major global chains are dusting off their Indian expansion project documents for reevaluation as well.
International expansion is the gold rush of 2012 and U.S. retail chains and restaurants that can't see any shining opportunity for expansion in their own country continue to focus on staking their claim and establishing retail presence in healthy and emerging economies around the world. This strategy has been especially helpful to retail and restaurant chains that are losing relevance and market share in the U.S. Retail brands that are worn out in the eyes of U.S. consumers are shiny and new in global markets which are on the upswing in the cycle of stuff acquisition.
So, while there is a slow and steady stream of additions to the 2012 U.S. Store Openings list, the plans and announcements for global expansion by U.S. retailers seem more sexy, more inspiring, and more promising. Reading between the lines, it's also easy to see how some largest U.S. retail chains are responding to their domestic retail challenges. Seemingly unable to turn the tide at home, many troubled U.S. retailers are literally just running away from home in search of markets that want to play nicer with them on the retail playground.
Highlights of the most recent announcements from troubled U.S. retailers regarding global expansion plans include:
Wal-Mart (WMT) will open fewer stores in Mexico than originally planned for 2012. Instead of opening 410 - 436 stores, Walmex now only plans to open 325 - 335 stores. The decision to open fewer stores is believed to be connected to Wal-Mart possible violations of the Foreign Corrupt Practices Act in conjunction with alleged bribery of Mexican officials, and the investigation surrounding its Mexican business dealings.
While it is will close 180 of its U.S. stores "over the next few years," Abercrombie & Fitch will be opening 40 Hollister stores in Europe and Asia, along with flagship stores in Amsterdam, Dublin, Hong Kong and Munich. Seemingly Abercrombie & Fitch is in a global search for consumers that Mike Jeffries and the offensiveness of the Abercrombie brand have not yet reached.
Burger King (BKW) is battling hard to regain its fast food throne. In the largest multi-unit development deal in its history, Burger King completed a joint venture agreement to open 1,000 restaurants in China over the next five to seven years. The company also recently announced plans to open several hundred Burger King restaurants in Russia. This was (strategically) announced just days before Burger King became a publicly traded company on the New York Stock Exchange, after going private less than two years ago.
Microsoft's (MSFT) decision to strategically locate its own copycat retail stores in close proximity to Apple retail stores in U.S. malls hasn't posed a serious threat to Apple yet. But apparently the strategy is working well enough because Microsoft is taking its retail show on the international road to Toronto, Ontario, Canada later this year. The Toronto shopping mall where Microsoft has signed papers already has an Apple store operating in it as well.
While Gap Inc. (GPS) is working hard to overhaul its brand and overcome the reputation of Gap-cheap that it built for itself in the U.S. in recent years, the company is planning to open its first Banana Republic store in France on the iconic Avenue des Champs Elysees this year. The company also announced recently that it will open Gap branded stores in Vietnam and Guam by January, 2013.
With teen unemployment at historical highs, teen apparel retailers have been looking for teens with disposable income in international markets. Aeropostale (ARO) announced this month that it will be opening seven stores in Quebec this year, which it will add to the 36 stores it already operates in Canada.
While Domino's (DPZ) is searching for ways to improve profitability in a highly competitive U.S. pizza market, the 5,000th Domino's Pizza restaurant outside of the U.S. opened this month, 27 years after the first international Domino's opened in Winnipeg, Manitoba. There are now more than 9,800 Domino's stores in 72 countries outside of the U.S., and in 2012 the number of international Domino's locations surpassed the number of Domino's restaurants in the U.S.
Sprinkles Cupcakes, recognized as the world's first cupcake-only restaurant, will leave behind the crowded and competitive U.S. cupcake market and open stores in ten countries in the Middle East this year. The franchise agreement with M.H. Alshaya Co. will put Sprinkles into the hands of upscale gourmet cupcake lovers in Bahrain, Egypt, Jordan, Kuwait, Leganon, Morocco, Oman, Qatar, Kingdom of Saudi Arabia, and The UAE.
Not all U.S. retail chains are opening international store locations as a defensive move. The global expansion of many retail chains is just part of their positive growth momentum. Highlights of 2012 global expansion plans for retail chains that are also thriving in the U.S. are:
While Apple (AAPL) is still opening retail stores in the U.S. at a brisk pace, it is also aggressively expanding internationally as well in an effort to keep up with global demand for its products. Two new flagship stores in China will open despite the trademark dispute that is as yet unresolved with Chinese-based Proview Technology. Click here for a complete list of Apple retail store global locations > >
Target (TGT) planning to open between 15 and 20 new stores in the U.S., which is more stores than it has opened in the U.S. in the past two years combined. Additionally, Target is opening 125 - 135 stores across Canada beginning in 2013, after making a $1.8 billion real estate deal to take over 189 Zellers locations.
J Crew (JCG) planning to open stores in the Fall in Hong Kong and Beijing, the first two stores outside of the U.S. for the 29 year-old clothing retailer, which has 238 locations in the U.S. Reportedly J Crew representatives have been scouting out UK locations this month and meeting with London real estate agents as well.
Kate Spade New York announced that it will purchase a majority ownership from its joint venture partner in Japan, where it has operated stores for the past 15 years. Kate Spade stores have opened recently in the UK, Dubai, and Kuwait, and the chain has announced it will open 2 stores in Brazil this summer and 300 stores in China by the end of 2020.
Costco (COST) is looking for locations in Europe, specifically in German, Italy, France, and Spain, with plans to open membership warehouses there in the next two years. In 2012 Costco plans to open six locations in Asia, including Taiwan and South Korea.
Starbucks (SBUX) opened its first store in Costa Rica this month, and has plans to open several hundred restaurants in Brazil, Argentina, and Mexico over the next five years.
Global expansion is not just a transient retailing trend, it is retailing's future and it solidifies an inevitable business reality that some try to discredit by labeling it as "socialistic." With inextricably intertwined global economies, nobody will win unless everybody wins. This is a business reality that is still hard for the uber competitive U.S. retail industry to grok, even though its own global expansion efforts are actively creating the reality.
Resistance is futile.