Shoppers browse through merchandise on offer at Gap Incorporated's flagship store in Shanghai, China. Image Credit: Bloomberg News
London: Australian mother-of-two Alinta Fidzewicz was so frustrated about Gap Incorporated's lack of online shipping to her country that she took to Facebook to rally the company, demanding service.
Four months ago, the company heard her cries. She now shells out A$700 (Dh2,534) a month on items from US-based companies including children's pajamas from Gap and an A$220 baby car seat from Amazon.com.
"I prefer the quality and the prices don't compete with Australia. Our mark-up is huge here," said the professional photographer, who lives in the Gap-less city of Perth.
"With the dollar being so good at the moment it makes sense to buy from America."
The Australian dollar has risen 9.8 per cent against the dollar this year.
Gap, which has two franchisee stores in Australia, is joining retailers including Amazon.com, Hennes & Mauritz AB and Inditex SA's Zara chain in expanding international delivery to tap into buoyant global demand without the added expense of operating stores.
Others, including Marks & Spencer Group Plc, have said they will follow suit.
Online sales will account for $201 billion globally, or 2.6 per cent of overall retail sales this year, up from 1.5 per cent of the total five years ago, Euromonitor research shows.
"It's becoming increasingly harder to gain market share in existing markets so online is the new market for growth," Natalia Grabov, an analyst at Verdict Research said.
"We're increasingly seeing retailers target the world as a whole. The competition is definitely heating up."
Advance guard
Marks & Spencer, the biggest UK clothing retailer, plans to spend £150 million in the next three years to build a new website and to add its first international country-specific site, which it hasn't identified, next year.
The retailer offers international delivery already and has stores in 41 countries. Marks said in 2001 that it was retreating from continental Europe and selling its US Brooks Brothers unit.
"Going into new countries before building stores is a non-capital intensive way of adding new markets," M&S chairman Stuart Rose said in October.
"It's a very good way of a business transporting its brand overseas, it's a bit like the advance guard."
Other companies are already drawing most of their growth from international sales.
Next Plc, the second-largest UK clothing retailer, is betting on international expansion to lift its revenue next year as austerity measures depress growth at home. Sales at its Directory unit, or online and catalog department, rose 7.9 per cent in the third quarter, compared with a drop of 3.3 per cent in same-store retail sales growth.
"It's a very low-risk and low-cost way of entering" new markets, said Anne Critchlow, a retail analyst at Societe Generale in London.
"There isn't the risk of having unsold stock abroad, there is no store lease and you don't have the risk and cost of employing local staff."
Gap began sending online orders from its US website to 55 countries in August and later opened dedicated e-commerce sites with local inventory for cheaper mail rates in Canada, the United Kingdom and China.
The company added shipping from its Stafford, England, distribution center to European countries including Germany and Italy in October, pushing its online reach to more than 80 countries.
Doubled margins
The response has "exceeded expectations," said Toby Lenk, president of Gap's Web unit as online sales surged 15 per cent in the quarter ended October 30, while overall revenue gained just 1.7 per cent.
With gross margins almost double the physical store business, e-commerce is a "very cost-effective way to expand and grow and get a presence geographically because the business model is so good."
The retailer has an agreement with FiftyOne, an e-commerce provider, which calculates the customs, duties and shipping fees for customers.
Asos Plc has avoided brick and mortar stores altogether. The London-based Internet retailer ships all orders from its UK warehouse.
The clothier, which sells a mix of branded and private-label items like faux leopard coats for $120, is the No 1 fashion site in Australia and Ireland by Internet traffic, according to market-research firm comScore.
Its shares have surged from 20 pence when it listed in 2001 to 1,323 pence on November 30 this year.
"We can internationalise very quickly," chief executive officer Nick Robertson said in an interview.
"Ninety-seven per cent of our opportunity is outside the United Kingdom."
First-half sales outside of the United Kingdom surged 120 per cent as the company introduced new country-specific sites in the US, France and Germany.
