Discount department stores and budget retailers are bracing for a step up in competition as international discounters Mr Price and TJ Maxx join the overseas retail invasion.
South African retailer Mr Price, which operates more than 1062 stores selling mainly private label apparel, footwear, sleepwear, homewares and sporting goods, has brought forward plans to set up shop in Australia and now plans to open its first two stores under the mrp brand in October.
Mr Price’s decision comes less than two weeks after US-based TJ Maxx, the largest off-price apparel and homewares retailer in the US, paid $US80 million ($108 million) for Gazal Corp’s 35-store Trade Secret business.
Discount retailers have been relatively immune from the influx of foreign fashion and homewares retailers that have arrived in Australia in the last few years. The likes of Zara, Top Shop, H&M, Uniqlo and Williams Sonoma have largely targeted the middle market.
Mr Price declined to reveal its long-term store targets but Mr Walker believes the cut-price retailer could open more than 50 apparel stores as well as separate furniture and sporting goods stores.
Mr Price chief executive Stuart Bird confirmed the group would initially focus on mrp apparel stores but said there was potential to open mrpHome and mrpSport stores over time.
“There will be many different businesses [affected] from sporting goods to fashion retailers,” Mr Walker said.
Mr Price’s entry could also challenge recent overseas arrivals such as Zara and H&M, whose earnings have come under pressure due to higher than expected operating costs and heavy investment in new stores.
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“It won’t just be about Australian-born retailers being challenged,” Mr Walker said.
Like its up-market South African rival, Woolworths Holdings, which paid $2.1 billion for David Jones last year, Mr Price also believes it is in a better position than Northern Hemisphere retailers to supply seasonally-relevant clothing and footwear.
“As a business based in the Southern Hemisphere, we’re able to offer Australians a relevant, seasonal trend-led assortment,” Mr Bird said.
Analysts say Mr Price and TJ Maxx will take sales from discount department stores such as Kmart, Target and BIG W, Harris Scarfe and Best & Less as well as value-based retailers including Reject Shop, Fantastic Furniture, Cotton On Group and Specialty Fashion Group’s Rivers chain.
First published in Australian Financial Review, 17 August 2015.