business news in context, analysis with attitude

The Wall Street Journal this morning reports that global retailers want to take advantage of American consumers' apparent willingness to keep spending money even in a time of inflation and a possibility of recession.

"Once wary of America, foreign fashion brands such as Mango, Uniqlo and Zara are joining retail giants including Lego and IKEA in pursuing major U.S. expansions," the story says.  "Executives say they are encouraged by the country’s upbeat economic prospects relative to other parts of the world, and a growing sense that American shoppers have become more receptive to new brands … Many of Europe’s best-known retail brands had previously focused their growth plans on emerging economies such as China and Russia. But Western brands closed hundreds of Russian stores last year after Moscow’s invasion of Ukraine. And some view China, while still important, as increasingly problematic because of political tensions and the rise of tough local competitors."

Mango, the story says, plans to open 40 stores by the end of next year.  Zara has some 30 projects on the board to be done during the same time frame.  And "Uniqlo, known for selling affordable fashion, recently said it plans to open 20 stores a year in the U.S., roughly quadrupling its North American store count by 2026."

However, some suggest that "the complexity of the U.S. market, with its big regional variations of climate, demographics and average wealth, makes the country potentially treacherous for the brands … Another challenge is the difficulty of hiring during a period of low U.S. unemployment, especially in retail, where competition for talent is fierce, they said.

"The foreign brands are also taking a risk opening outlets in a country with steep competition in the sector and many cities that have a glut of retail space. 

Primark initially moved cautiously in the U.S., opening only a handful of stores at first … It wasn’t until demand for the company’s products strengthened that managers were persuaded to commit heavily to the country. Primark, which has gained cult-like status across the Atlantic for its bargain-price clothes, is now targeting 60 American locations by 2026."

KC's View:

One of the things not addressed in the story is where these stores will be going.  Are they planning to open in urban locations?  As suburban standalone stores?  Or in malls, which remain, I think, problematic.

There would appear to be room in the US marketplace for retailers like these, but they will have to be willing to adapt their processes and approach to US consumers, who shop differently than their European and Asian counterparts.