Cautious Asian Retailers Look to US

CHICAGO—Asian retailers increasingly want the world to see them as global players, and in order to reach that milestone, many have come to the conclusion that they need outlets on the West Coast. Establishing themselves there, however, may take some time, since Asian business owners remain cautious and want to make sure they fully understand local market conditions in the US before taking the plunge.  

“They want to be there because the West Coast, especially Los Angeles, San Diego and San Francisco, have a very strong retail scene,” Thomas Gaffney, the Hong Kong-based head of retail for JLL, tells GlobeSt.com. However, the West Coast only forms one part of an American strategy, since at the same time most of these retailers also believe it's important to establish outposts in other core US cities such as New York and perhaps Chicago.   

Chow Tai Fook Enterprises, Ltd., he points out, owns one of the biggest jewelry retailers in the world, but outside of Asia, where the Hong Kong-based company has thousands of outlets, “not many people have heard of them.” 

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Asian retailers are a very diverse lot, he adds, and will approach the US market with different expectations. Lorna Jane, an Australian activewear chain, for example, saw a lot of similarities between its home market and the West Coast market, making its officials very comfortable expanding into the US. The company began rolling out a US chain of stores a few years ago, including many in Seattle and California.

Many other Asian brands, especially ones from China, are not yet mature enough to compete for US consumers, Gaffney says. Unlike Japanese brands, and many Korean ones, most Chinese companies don't have enough experience operating in a Western environment and may have difficulty connecting with potential customers. “They are starting that journey now.”

Much of this desire for expansion is driven by the growing power and reach of Chinese consumers. “They want to travel further afield and experience New York and San Francisco, and as they travel, they want to shop and they are going to spend a lot,” Gaffney says. And not only do Chinese retailers want to get their share of those dollars, they also want to make sure middle-class consumers see products from back home as equal to Western-based brands.

And it's these considerations that will lead Asian retailers to concentrate their expansion efforts on core cities instead of secondary markets, he adds. “If they spring up in Kentucky, it's not going to have the same impact. They will certainly face a lot more competition, but they know that the consumers are there. The core American markets are expensive, but not nearly as expensive as other markets where they are well-established, especially Hong Kong and Japan.”  

Still, he also does not expect most Asian retailers to emulate Lorna Jane's aggressive American expansion. In fact, most Chinese companies eyeing the US market won't begin a real push for at least 12 months. Until then, these retailers will be content to put out feelers in the various core markets and perhaps look for a Western partner.

“A person from Shanghai is not going to know the local markets,” Gaffney points out. But he also expects that, for reasons of pride, many Chinese companies will reject Western partnerships and instead send a trusted employee to settle in a targeted market and learn the ins-and-outs of operating there. 

And after this learning period, he expects most will take it slow and only open a few stores to test the waters. Even Hong Kong-based firms, which unlike mainland companies have operated within a Western-style economy for generations, tend to be conservative and will probably take a measured approach. “I don't think we are going to see a mass rollout.”