Global Brands coming to US as Market Opens to New Brands

Some retailers now view U.S. expansion as the surest way to boost revenue amid a shaky global economy

· Total U.S. retail spending came in at $7.1 trillion last year, according to the Census Bureau, more than any other country.

· The market is eager to have newcomers, companies that can bring something different

· The US Mango’s fifth-largest e-commerce market despite its tiny physical presence. In comparison, it has hundreds of stores in core European markets such as Spain, Germany and France.

· Fellow Spanish brand Zara has drawn similar conclusions. Though its owner, Inditex ITX 5.94%increase.

· The complexity of the U.S. market, with its big regional variations of climate, demographics and average wealth, makes the country potentially treacherous for the brands.

American consumers have long been renowned for their spending power. Now global retailers want a bigger slice of the action.

Once wary of America, foreign fashion brands such as Mango, Uniqlo and Zara are joining retail giants including Lego and IKEA in pursuing major U.S. expansions. Executives say they are encouraged by the country’s upbeat economic prospects relative to other parts of the world, and a growing sense that American shoppers have become more receptive to new brands.

“The scale of it and the wealth of the consumer—the U.S. clearly has an appeal,” said John Bason, chairman of Primark’s strategic advisory board. Total U.S. retail spending came in at $7.1 trillion last year, according to the Census Bureau, more than any other country. Primark, the Irish fashion retailer, plans to open dozens of new U.S. stores in the coming years.

Many of Europe’s best-known retail brands had previously focused their growth plans on emerging economies such as China and Russia. But Western brands closed hundreds of Russian stores last year after Moscow’s invasion of Ukraine. And some view China, while still important, as increasingly problematic because of political tensions and the rise of tough local competitors.

The U.S., with its own cherished brands, used to be a tricky prospect for some foreign entrants, but today “the market is eager to have newcomers, companies that can bring something different,” said Daniel López, expansion director at Spanish fashion retailer Mango. And in contrast with some other regions, “it’s a stable market,” he said, with new wealth pools presenting opportunities that foreign companies would once have overlooked.

For Mango, the U.S. was until recently a frontier. The brand, known primarily for women’s fashion, opened one store in New York in 2011 to test the waters, but with no great expectations, López said.

Yet company executives were surprised to see online sales in the U.S. surge in recent years, making the US Mango’s fifth-largest e-commerce market despite its tiny physical presence. In comparison, it has hundreds of stores in core European markets such as Spain, Germany and France.

The surge convinced Mango executives that the mind-set of American consumers had shifted in favor of new foreign brands as they sought “novelty” in the form of European fashion alternatives, López said. The rise of social media, providing channels for brands like Mango to market themselves to a U.S. audience without the need for a large physical presence, has underpinned the shift, he said.

Last year, Mango opened a new flagship store on New York’s Fifth Avenue as part of a push to open 40 U.S. stores by the end of 2024, including in Atlanta, Houston and San Diego. In contrast, China, where Mango has a small presence, isn’t part of the company’s expansion plans, López said.

Fellow Spanish brand Zara has drawn similar conclusions. Though its owner, Inditex ITX 5.94%increase; green up pointing triangle, is the world’s largest fashion retailer by sales, Zara has a modest U.S. footprint compared with its ubiquitous presence in Europe. Even as it closes hundreds of older and less profitable stores around the world, the company has decided to expand in the U.S., with at least 30 projects, including new stores and refurbishments, planned by 2025, it said.

Despite its global prevalence, Zara says it is just getting started in America. “We see significant long-term growth opportunities in the United States,” Inditex Chief Executive Óscar García Maceiras said on a recent earnings call, with cities including Las Vegas, Miami and Austin, Texas, among those the company is targeting for expansion.

Uniqlo, known for selling affordable fashion, recently said it plans to open 20 stores a year in the U.S., roughly quadrupling its North American store count by 2026. The brand—owned by Japan’s Fast Retailing—said it was shifting its expansion plans, which had long been focused on China and other Asian markets, to the U.S. in response to strong local demand.

Still, the complexity of the U.S. market, with its big regional variations of climate, demographics and average wealth, makes the country potentially treacherous for the brands, some executives said. Another challenge is the difficulty of hiring during a period of low U.S. unemployment, especially in retail, where competition for talent is fierce, they said.

The foreign brands are also taking a risk opening outlets in a country with steep competition in the sector and many cities that have a glut of retail space.

Primark initially moved cautiously in the U.S., opening only a handful of stores at first, said Bason. It wasn’t until demand for the company’s products strengthened that managers were persuaded to commit heavily to the country. Primark, which has gained cultlike status across the Atlantic for its bargain-price clothes, is now targeting 60 American locations by 2026.

Other foreign retailers have also grown more confident in their ability to capitalize on the U.S.’s potential, executives say, encouraged by online orders and having gained a better understanding of the market.