Foreign Retailers Setting Up Shop, Expanding in the U.S.

By Stephanie Skrbin, Associate, Lee & Associates

With the U.S. economy struggling, foreign retailers are nevertheless seizing the opportunity to set up shop here through net-lease deals.

By Stephanie Skrbin,
Associate, Lee & Associates

With the U.S. economy struggling, foreign retailers are nevertheless seizing the opportunity to set up shop here. They’re choosing to do this for a number of reasons: They have already saturated the markets where they are based; there are lower-than-normal rents in the U.S. that make the formerly unattainable actually achievable; and/or there is a reduced risk due to lower cost of entry. The most recent example of this trend was with H&M, Zara and Mango, and now some of their direct competitors want to play here, too.

The Canadian-based retailer Joe Fresh is the latest to arrive on the scene. The low-cost fashion line, which competes with H&M, Forever XXI, Zara and Mango, first entered the U.S. with a temporary store in East Hamptons, N.Y. They eventually settled on opening their first permanent store on Manhattan’s tony Madison Avenue. The brand is also slated to open in two regional malls just outside New York City and will look to expand from there.

Fashion-forward retailer Zara has already been in the country for several years, reaching 48 stores nationwide. They continue to expand — and will join Joe Fresh in rolling out a store on one of Manhattan’s posh retail corridors — choosing Fifth Avenue, where rents average $2,250 per square foot. The concept, whose parent company is Inditex, will continue to expand here, but sees this opening as a must to brand themselves here.

Uniqlo, a Japanese concept from parent company Fast Retailing, also chose Fifth Avenue for their second U.S. location. They opened their first two stores in 2004 and 2005 in New Jersey and SoHo, respectively. Expansion halted until they could ensure these first two stores were successful. Eventually, they closed the New Jersey store and opened the Fifth Avenue store and, more recently, opened on 34th Street. Uniqlo, whose mainly competes with Gap, plans to open 200 stores overall domestically.

Another Spanish retailer, Desigual, made an impact here with its first NYC store in 2010. Since that first store, the brand has expanded to San Francisco, Las Vegas, Miami and Santa Monica. Grand openings in the U.S. create major buzz, spawning the “Undie Party,” in which the first 100 customers to enter the store wearing only undergarments receive a free outfit. The brand continues to seek locations in the major metropolitan markets.

British retailers Top Shop and All Saints are also crossing the pond. Top Shop, the high-fashion, affordable brand, has only two locations in the U.S.: on Broadway in New York City and on Michigan Avenue in Chicago. The concept, whose parent company is Arcadia Group, is eyeing the West Coast for further expansion and prefers street-retail space in fashion districts, as opposed to regional mall opportunities. All Saints, meanwhile, entered the U.S. in 2010 with six stand-alone stores and, through a partnership with Bloomingdales, rolled out branded stores within several of their department stores. The concept currently operates 14 U.S. stores with a goal of 50 stores by 2015.

Traditionally, foreign retailers do not bode well in America and whether these stores will buck the trend remains to be seen. One thing is certain: The audacity of their expansion plans indicates they have no plan on leaving in the near future.