But with another year of recovery under
their belts, sellers can point to consistent
results from the last three years as justification for the prices they are expecting.
A third “maybe trend” is some progress in addressing the chronic problem of
the custom manufacturing segment of
the industry—customer concentration.
Industry executives who have survived the
last two industry recessions have plenty
of scars to remind them of the dangers of
having a very small number of customers representing a too-large share of their
sales. The process of diversifying the customer base is time consuming, challenging,
and typically a low-margin endeavor for the
first few years. But we know of a number of
member companies that have succeeded in
expanding their customer list beyond their
narrow base of two or three core customers.
From my perspective, 2014 promises
at this point to look a lot like 2013. Retail
environments suppliers can expect continued modest improvements in sales and
profit margins. Bankruptcy risk should
continue to abate. And imports will continue to play an important role. It may not
be sexy, but 2014 looks to be a fifth consecutive year of recovery.
Klein Merriman is former executive director of
the Association for Retail
him at kleinmerriman@
TWO VIEWS ON THE INTERNATIONAL OUTLOOK
Klein Merriman talked recently to both PREBEN BAILE Y, general secretary of the International Shopfitting Organi
zation, and SIMON ONG, group managing director of Kingsmen Creatives Ltd., for their perspectives on retail
environments business conditions internationally.
Bailey is a veteran of more than 35 years in the retail environments industry. ISO, based in Sweden, is a consor
tium of national shopfitting associations and individual members from 20 European and nonEuropean countries.
Ong is a member of A. R. E.’s board of directors and the association’s International Task Force. Based in Singa
pore, his company, Kingsmen Creatives Ltd., has a regional net work of 18 offices and facilities in Asia Pacific and
the Middle East.
EUROPE: TRENDS VARY BY COUNTRY
Q What are business conditions for the retail environments industry in Europe for 2013 and expectations for 2014?
PREBEN BAILE Y: You really can’t understand much if you try to talk about Europe
overall. Business conditions vary greatly by country. In 2013, it varies from good
in some countries to average in others, and poor in some. For next year, we expect
amazing growth in Russia and the Baltic states, particularly because of the growth
in shopping malls and exports of shopfitting products.
In the “good” category, I’d also place Norway. Growth in Sweden and Germany should be average,
and in France and Belgium poor. In my opinion, business conditions in Spain and Holland will be
disastrous. Italy is very difficult to predict.
ASIA: SLOWER GROW TH
Q Is the market share for Asian-produced fixtures that are installed in North America continuing to grow?
SIMON ONG: While the market share for Asianproduced fixtures installed in
North America is still growing, it’s now growing at a slower pace than in previous
years. The slowdown is for two main reasons: First, freight costs are continuing to
increase, and this increases our overall costs, which means that our fixture prices
need to be 10 to 15 percent lower than a North American supplier’s prices in order to
compete in the local market. Second, due to the downturn in the economy in North America, U. S. fixture
suppliers are now more competitive and more affordable.
Q How about the market share for Asian-manufactured fixtures destined for Europe? ONG: The market share held by Asian manufacturers in Europe is typically smaller than in the
U.S. This is due to the stagnant European market and the easy availability of cheaper manufacturing
solutions from Eastern Europe. Eastern Europe has a lot of advantages compared to Asian manu
facturers, including close proximity to the Western European markets and quick access to European
technologies and knowhow.
Q Across Asia, what do you expect for demand for retail environments in 2014? ONG: As the Asian economies continue to grow, and the region is continuing to experience a
relative calm in regional conflicts, North American and European retailers will continue to look to Asia
as a good place to expand their businesses. We therefore expect to see existing brands and new brands
increasing the demand for retail environments throughout Asia, albeit at a more measured pace—and
with an increasing focus on quality.
Q Do you forecast any particularly strong or weak countries or regions in Asia for next year? ONG: I expect the Asian economies in general, and the demand for retail environments in
particular, to continue to grow—but perhaps not as quickly as we’ve seen in recent years. In particular,
the economies of Southeast Asia, South Korea, and China.
Q Where are fixtures typically being manufactured for stores that are opening in Asia by North American and European brands? In the host country? In China and shipped to countries like
India and Vietnam?
ONG: We are seeing our North American and international clients coming up with strategies to better
suit their objectives when it comes to delivering their retail environments. These strategies try to not
only minimize delivery times and access to good manufacturing facilities, but also take advantage of
freetrade agreements among Asian countries to minimize tax expenses. This has meant that clients
have more confidence in going for local solutions. We are also seeing fewer fixtures coming from
North America to Asian stores, unless there are special requirements for materials or finishes.
Q Are you aware of any Asian retail environments providers investing in North America? ONG: No investments big enough to be newsworthy yet. Perhaps this is due to the weak U.S. retail
market in recent years. However, as U. S. retail continues to recover, many Asian manufacturers are now
actively marketing in the U.S. They typically have either a small U. S. base or a sales representative
here. Investment in North America is a logical next step for the global players.
PREBEN BAILE Y
Retail Environments Providers
2013 Profit Expectations
65% of respondents expect
PROFITS WILL BE BET TER
9% of respondents expect
PROFITS WILL BE WORSE
26% of respondents expect
LIT TLE CHANGE IN PROFITS
compared to last year