Entering the Asia Retail Market. An Increasingly Challenging Exercise

Nov 02, 2021

The last few years have seen more and more brands look at Asia-Pacific retail as a lifeline for their ailing businesses, severely hit by the Covid and by general weak retail markets in the US, Russia, the Middle East, and Europe.

In a post last year, we mentioned that the gold rush to the China retail market sparked off by the Covid was more of an illusion than a real chance to tap into a booming market. On the contrary, Covid would only raise the bar and make Asian markets, and China in particular, more difficult to enter.

Firstly, most international brands still enter Asia through a distributor or a local investor. Yet, distributors, notably those focused on pure retail, such as mono-brand retail, are decreasing in numbers and quality. This has happened because the costs of retail or better to say, omnichannel retail, have skyrocketed, reducing appetite for new “acquisitions”.

Secondly, Asian distributors usually prefer long-term trusted relationships and do not fit well in the corporate world of management turn-overs and ownership take-overs that concerns the majority of brands nowadays. (About this, read our past article)

Finally, local brands are starting to grow, notably in China, a new factor that is shifting investors’ interest from international to domestic brands.
International new entrants need therefore to change their approach to Asia and be ready to make investments in the market, by supporting the distributors and sharing with them start-up capex and marketing investments.

Alternatively, they should plan direct investment and set up their team on the ground. (For example, read Pineider store in Singapore). The old approach, whereby the distributor would fully take care of the brand in the market limiting the risk for the brand to the minimum, is long gone. The last two years, far from opening up the market, have further reduced its access and increased the challenges for new entrants. In a nutshell, the longer a brand wait the more expensive it gets to come to Asia.

Texere offers its strong retail experience combined with a trusted network of partners and distributors, allowing a fast and sustainable market penetration. If you are interested in finding out how to grow your business in Asia, reach out to us for a free consultation at info@texereadvisors.com

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