It was ‘the’ topic during Milan Fashion Week this spring: Starbucks is going to open its first store in Italy next year. Italy – birthplace of coffee culture and until now a ‘Starbucks-free nation’ – will host the first coffee shop of the Seattle coffee chain, right in downtown Milan! Swiss giant Nestlé first entered Italy in 1999 and opened a Nespresso flagship store (out of 6 worldwide) in Milan last year, now another big player is daring to do the impossible – the equivalent of selling ice to the Eskimos.
The opening of Primark’s first store recently was another big bang for the Italian retail market. The famous Irish fashion giant has chosen the brand new shopping centre ‘Il Centro’, in Arese near Milan, to host its first foray into the Italian market. This is the biggest of Italy’s regional malls, located on the former Alfa Romeo site and hosts more than 200 stores; among them several other prominent debutants to the Italian market such as LEGO and Under Armour.
Supply Creates Demand
So why is Italy so attractive these days for international powerhouses wanting to establish themselves in new markets? The most important reason is the improved availability of quality retail space – in the past, finding appropriate, large sized retail space in prime locations was quite challenging to near impossible.
Shopping centre-wise, Italy is still a so-called ‘opportunity market’, with a large population but a shopping centre density (GLA/1.000 population) below the Western European average. In 2015 it was around 229 sq.m compared to the number 1 shopping centre market – Norway – with 926 sq.m. However, Italy has caught up over the last 10 years – by nearly doubling its shopping centre space to approximately 13.8 million sq.m nationally. There is also more than 700.000 sq.m of new space expected in 2016/17.
Italy’s shopping centre market is marked by the arrival of large schemes and significant projects that create more supply for international players such as: Westfield Milan; Merlata Mall, Milan; Roncadelle, Brescia; and GrandApulia, Foggia. Also real estate company Cushman & Wakefield follows the Italian trend to be prepared by having bought Cogest Retail – an Italian retail asset services and leasing firm with a portfolio of 51 shopping malls and retail parks across Italy under management. The consolidated company will double the size of C&W’s current business and manage circa 3.5 million sq. m of floor space in Italy.
The International ‘Who’s Who’ in the Italian Market
So which international players are already succesfully active in the homeland of some of the world’s most famous fashion brands? There are well established global brands with a broad and long-term presence such as Timberland (∼160 stores), Nike (∼ 50 stores), Tommy Hilfiger (∼30 stores) or Ralph Lauren (∼8 stores). But also ‘new Italians’ such as Michael Kors (2008), Superdry (2010), Desigual (2011) and Victoria’s Secret (2012) have arrived in the last couple of years. Besides running stand alone stores, these international brands are also well distributed in department stores such as Coin and La Rinascente.
Is There a Perfect Way to Enter the Italian Market?
To decide the best entry mode, companies need to consider also Italy’s very local specialities and challenges. Italy as a network driven country has its own rules. Relationships are crucial factors – between brands and retail partners as well as between local stakeholders. Bureaucracy, corruption, high levels of taxation, long payment terms and political and legal reforms have been applied, but a real breakthrough is yet to have taken place.
Weighing these circumstances plus considering the expertise of strong local and well established partners such as Percassi or Libenzi, many global players (Zara, Victoria’s Secret, Timberland, Lego and more) choose cooperations. Activewear company Under Armour just announced its plans to open 20 stores over the next 7 years with the Italian Oberalp group. Also Starbucks has picked Percassi as a partner for opening the Italian market – Percassi will own and operate the stores as the primary licensee.
Mango on the other hand entered Italy in 2001 without local alliance. The company decided to have a few of their own flagship stores in the top retail locations, while the rest are franchise stores. Furthermore, they currently run around 40 corners in Coin department stores.
To Partner or not to Partner?
If the question is to partner or not to partner, there is no ideal solution to suit all companies. The choice is dependant on various parameters that raise questions such as:
- Is the focus on showcasing the brand by opening flagship stores?
- Does the brand intend to take place first in department stores?
- How many stores does the brand/retailer intend to open and run?
- Will the stores be located in the top retail/tourist cities only?
- Will the stores be placed all over Italy or only in the northern part?
Whether you plan to launch a brand in Italy or you are already there, the time is perfect to grow your brand into a meaningful business in Italy. As the saying goes, ‘all roads lead to Rome’ so what might be the right one for you?
About the Author:
Isabell Guidastri has worked most of her professional life with brands on their local & global brand distribution strategies, including with many well-known global powerhouses in branding & retail. Retail in Brazil, franchise in Turkey or traditional wholesale in Germany were just some of her virtual project travels in the last 24 months. But above all, the challenges of Italy are her great love, since marrying an Italian and now commuting between Germany and Modena, Italy – home of fast cars and slow food. Contact her by email for more information and further discussion on your favourite country and distribution strategy. Or see more from her here.