<\/a><\/p>\n

At the same time, the appetite for expansion has been recalibrated.\u00a0 For example, retailers are looking at creating a number of ‘scouting options’ through low risk entry options such as franchising and converting into JV’s or owned operations based on market adoption and regulatory ease.<\/p>\n

While, there is no one universally accepted definition for an Emerging market, the most usual definition is one where consumers have confidence in their economic future over prolonged periods of time.<\/p>\n

The global retail industry is one of the catalysts that instill this sense of hope. So what are the specific trends, challenges, and success strategies that retailers should adopt for varied emerging markets? A. T. Kearney’s Global Retail Development Index 2013, provides insights on Retailing in Emerging Markets.<\/p>\n

Key Findings of the 2013 GRDI<\/strong>
\nSouth America surfaces to be the hot spot in the emerging market space as Brazil, Chile & Uruguay are the top three markets in the Index. Additionally countries like Peru, Columbia, Panama & Mexico also shine while Venezuela, Argentina and Bolivia have room for improvement.<\/p>\n

<\/a>As for the BRIC (Brazil, Russia, India, and China), they still maintain their status of ‘magnificent monsters for global retailers’. Each one of the market is huge and attractive, however each is following a different path for future growth.\u00a0 (See Sidebar \u2013 BRICS of Retail).<\/p>\n

BRICS of RETAIL<\/strong>
\nBrazil is in the midst of a great run, with the 2014 World Cup, the 2016 Summer Olympics, high FDI, and vibrant fashionable shoppers. But what happens after 2017? In the World Economic Forum’s most recent Competitiveness Index, Brazil ranks high in size, sophistication, access to financing, and the use of information and communications technology. However, it posted low scores in key areas such as infrastructure, health, primary education, and government regulation and spending. Labor laws, a swollen welfare and pension budget, and an industrial sector that is shrinking as a percentage of GDP are hampering the country’s long-term development. The next couple of years will be wonderful, but what happens after that?<\/p>\n

Russia is in a difficult position\u2014a triple threat of sorts. Natural resource prices are falling, the country has a current account debit balance and a budget deficit, and its demographic profile places a large burden on government funding mechanisms. Although geographically massive, Russia’s population of 143 million (including autonomous regions) is relatively small and growing minimally. While middle-class spending and shopping behavior are vibrant and the Russian market is well-developed, what happens when the oil money dries up and the aging population starts to shrink? Could Russia benefit from shale gas?<\/p>\n

India has a bumpy road to drive over the next few years. The country is a modern economy the size of Mexico working to provide educational and other opportunities to a rural population the size of sub-Saharan Africa. Two-thirds of the Indian states are surprisingly against open imports and foreign direct investment (FDI), in what could only be perceived as a conscious policy to stop global competitiveness. Still, there is a lot of good news in India as Indians get richer and more mobile. With the country poised to enjoy a demographic advantage for the next 40 years, it would be a shame not to seize all of the potential opportunities.<\/p>\n

China needs to shift gears. Once everyone’s darling as a source for manufacturing, China is facing problems that more investment will not solve. The biggest issue is that the Chinese continue to be savers rather than buyers, which means all the global monetary shenanigans and fiscal intensity cannot “push” when there is no “pull.” To meet the expectations of becoming the world’s number two economy in a few years, China must move from first gear\u2014a high-energy, high-stress, high-ratio government push market\u2014to second gear\u2014a consumer pull market. Ideally, the country would take four to five percentage points of growth and use it to address environ.mental concerns about land, water, and human capital.<\/p>\n

– See more at: http:\/\/www.atkearney.com,\u00a0 Extracted and edited from the A T Kearney 2013 Global Retail Development Index.<\/p>\n

<\/a>Sub-Saharan Africa is a rising star as the region is building momentum. With Botswana & Namibia in the rankings and a few other nations on the cusp Africa is a promising market. By 2100, five of the 12 most populous countries in the world will be in Africa, there is no doubt that this continent is a dramatic retail opportunity-for those that can navigate the business and political risks.<\/p>\n

Latin America : Regional Profile<\/strong>
\nDominates the GRDI as three nations of the region occupy the top three positions and seven of the top 30 overall.<\/p>\n

Increased consumer & investor confidence have created a favorable environment for retail development.<\/p>\n

Factors that contribute to this consumer & investor confidence include:
\n\u2022\u00a0\u00a0 Strong & growing middle class
\n\u2022\u00a0\u00a0 Controlled inflation
\n\u2022\u00a0\u00a0 Sustained economic growth
\n\u2022\u00a0\u00a0 Continual economic & political stability<\/p>\n

The expanding middle class continues to offer important growth opportunities, particularly as the retail footprint expands beyond main cities into the second and third tiers, where consumers increasingly prefer modern retail. And many local and regional retailers are providing strong competition for many of the international leaders. For example, Chile’s Cencosud has expanded into neighboring countries, gaining strength in markets such as Peru and Colombia.<\/p>\n

Country Specific Highlights: Brazil<\/strong><\/p>\n

On top again<\/strong>
\nBrazil tops the GRDI for the third consecutive year. Despite a GDP slowdown (1 percent in 2012), retail spending remains strong and is expected to rise 11 percent in 2013.<\/p>\n

Factors propelling growth<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Continued expansion
\n\u2022\u00a0\u00a0\u00a0 Organic growth
\n\u2022\u00a0\u00a0\u00a0 Infrastructure improvements
\n\u2022\u00a0\u00a0\u00a0 Rising consumer confidence
\n\u2022\u00a0\u00a0\u00a0 Stronger employment rates
\n\u2022\u00a0\u00a0\u00a0 Increased credit access for middle class
\n\u2022\u00a0\u00a0\u00a0 Brazil’s middle class – expected to grow to 113 million people by 2014, or roughly
\n56 percent of the population\u2014are proving attractive to retailers.<\/p>\n

Key locations<\/strong>
\nSao Paulo, Rio De Janeiro and modern retail also percolating in Brazil\u2019s north & northeast and to larger interior cities<\/p>\n

Investments scenario<\/strong>
\nMany international funds are showing confidence in the market.
\nJ.P. Morgan Asset Management invested more than $45 million in online fashion retailer Dafiti.
\nThe Carlyle Group acquired an 85 percent stake in toy store chain Ri Happy, which will add 20 new stores to an existing 110 by the end of 2014.<\/p>\n

Key retail players in the market<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Wal-mart
\n\u2022\u00a0\u00a0\u00a0 Department store Riachuelo
\n\u2022\u00a0\u00a0\u00a0 Apparel Retailers \u2013 Hering & Lojas Renner
\n\u2022\u00a0\u00a0\u00a0 Supermarkets –\u00a0 P\u00e3o de A\u00e7\u00facar and Polishop
\n\u2022\u00a0\u00a0\u00a0 Drug Stores \u2013 RaiaDrogasi
\n\u2022\u00a0\u00a0\u00a0 Luxury Malls – JK Iguatemi in S\u00e3o Paulo and Village Mall in Rio de Janeiro. Housing international brands Valentino, Miuccia Prada, Miu Miu, Goyard, Lanvin, Van Cleef & Arpels, Bare Minerals, Topshop, Dolce & Gabbana, and Nicole Miller, Gucci, Mont Blanc & Tiffany & Co.<\/p>\n

Additional Factors<\/strong>
\nThe FIFA World Cup in 2014 and the Olympic Games in 2016 are drawing important investments in travel retail.<\/p>\n

Country Specific Highlights: Chile<\/strong><\/p>\n

<\/a>Sophisticated, attractive market<\/strong>
\nA highly sophisticated retail market once again propels Chile (2nd) to near the top of the GRDI.<\/p>\n

Factors propelling growth<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Steadily increasing retail sales. Disposable incomes have expanded by 10% in the past one year
\n\u2022\u00a0\u00a0\u00a0 At $8,241 per capita, consumer spending ranks sixth among the GRDI’s 30 countries.
\n\u2022\u00a0\u00a0\u00a0 High rate of economic growth for the past two decades
\n\u2022\u00a0\u00a0\u00a0 Structural reforms, political stability & export oriented economy
\n\u2022\u00a0\u00a0\u00a0 Low inflation (about 3%) supports domestic consumption<\/p>\n

Key retail players in the market<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Walmart Chile
\n\u2022\u00a0\u00a0\u00a0 Costanera Center in Santiago
\n\u2022\u00a0\u00a0\u00a0 Foreign retailers such as Armani Exchange, Brooks Brothers, Hugo Boss, Swarovski, Tommy Hilfiger, Banana Republic, G-Star Raw, Fa\u00e7onnable, Longines, and Hard Rock Cafe.<\/p>\n

Country Specific Highlights: Uruguay<\/strong><\/p>\n

Consumer spending on the rise<\/strong>
\nUruguay (3rd) moves up one spot as consumer spending continues to increase. Historically dependent on its neighbors Braziland Argentina, the country is becoming a core retail destination on its own merits.<\/p>\n

Factors propelling growth<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Economic growth
\n\u2022\u00a0\u00a0\u00a0 Real estate availability
\n\u2022\u00a0\u00a0\u00a0 Strong flow of tourists
\n\u2022\u00a0\u00a0\u00a0 Political Stability<\/p>\n

Key retail players in the market<\/strong>
\nLouis Vuitton, Cartier, Yves Saint Laurent, Ermenegildo Zegna, Emporio Armani, and Calvin Klein have opened stores in Uruguay or plan to do so. Gap opened its first Uruguay store in December 2012 to enter its second South American market.<\/p>\n

Asia: Regional Profile<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Six Asian countries rank in the GRDI.
\n\u2022\u00a0\u00a0\u00a0 Asia has felt the effects of the global economic slowdown, but consumer spending growth, continued adoption of modern retail, and solid economic fundamentals keep Asian markets attractive to global retailers.
\n\u2022\u00a0\u00a0\u00a0 China remains to be retail powerhouse both in bricks-and-mortar stores and online, as consumers outside of major cities flock to modern retail formats.
\n\u2022\u00a0\u00a0\u00a0 Other promising markets in Asia include smaller markets – Mongolia and Sri Lanka and large markets such as India, Malaysia, and Indonesia.<\/p>\n

Country Specific Highlights: China<\/strong><\/p>\n

A global retail leader<\/strong>
\nChina (4th) falls one spot in the rankings, but its retail market remains irresistible to global retailers of every stripe. With double-digit sales growth and rising consumer demand (albeit somewhat more slowly), China remains a dynamic retail environment.<\/p>\n

Retail market dynamics<\/strong>
\n\u2022\u00a0\u00a0\u00a0 The hypermarket format has room for growth. For example, Sun Art Retail Group, which operates Auchan and RT-Mart stores in China, had 14.3 percent revenue growth in 2012 as it expanded rapidly with 43 new stores.
\n\u2022\u00a0\u00a0\u00a0 The luxury segment has slowed, recently as consumers purchase more goods abroad and amid tighter regulations on gifting to government officials. Some luxury brands are rethinking their expansion plans in China.
\n\u2022\u00a0\u00a0\u00a0 E-commerce now represents as much as 10 percent of retail revenues in some categories. Total online sales reached $207 billion in 2012, and continued growth is expected. Online players are using heavy promotions to grab share from bricks- and-mortar stores.
\n\u2022\u00a0\u00a0\u00a0 Small- and medium-sized stores are gaining popularity due to their lower-
\npriced offerings and formats that cater to Chinese shopping habits.
\n\u2022\u00a0\u00a0\u00a0 Malls are growing more popular as they add more shopping and entertainment
\nalternatives into the mix. There are now 3,100 malls in China, with 288 added in 2012,
\nprimarily in tier 2 and 3 cities.<\/p>\n

Country Specific Highlights: India<\/strong><\/p>\n

<\/a>Growth slowdown, but still strong<\/strong>
\nThe global slowdown hasn’t spared India, whose GDP growth rate slipped to 5 percent, down from a 10-year average of 7.8 percent.<\/p>\n

Key Factors propelling growth<\/strong>
\n\u2022\u00a0\u00a0\u00a0 A large, young, increasingly brand & fashion conscious population
\n\u2022\u00a0\u00a0\u00a0 Retail growth of 14 to 15 percent per year is expected through 2015.
\n\u2022\u00a0\u00a0\u00a0 Modern retail remains limited (7 percent in 2012), but it is expected to grow as the country urbanizes and retailers make new investments.
\n\u2022\u00a0\u00a0\u00a0 The government allowed 100 percent foreign direct investment in a single brand for the first time, and has received more than 100 investment proposals.
\n\u2022\u00a0\u00a0\u00a0 After much public debate the country has seen \u201cMulti-Brand\u201d Retail investment interest from TESCO (which already operates a back end sourcing JV with the TATA Group).<\/p>\n

Key Issues<\/strong>
\n\u2022\u00a0\u00a0\u00a0 High operating costs
\n\u2022\u00a0\u00a0\u00a0 Low bargaining power with vendors
\n\u2022\u00a0\u00a0\u00a0 Heavy discounting to improve sales have affected profits & expansion plans
\n\u2022\u00a0\u00a0\u00a0 Real estate costs continue to be high. Space availability is a challenge.<\/p>\n

Key strategies being adopted by retailers<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Sales productivity
\n\u2022\u00a0\u00a0\u00a0 Cutting operating costs
\n\u2022\u00a0\u00a0\u00a0 Reducing Store Size
\n\u2022\u00a0\u00a0\u00a0 Retailers are expanding in tier 2 and 3 cities as real estate costs in major metro areas skyrocket.<\/p>\n

Market Dynamics<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Online shopping is in the early stages, with e-commerce sales equal to less than 1 percent of all retail sales, but growth is expected as more people access the Internet.
\n\u2022\u00a0\u00a0\u00a0 Mobile phones, electronic appliances, apparel, movies, music, and books are the fastest-growing categories.
\n\u2022\u00a0\u00a0\u00a0 New entrants, new business models, and new niche categories have flooded the market, yet few players have turned profitable yet.<\/p>\n

Central Asia & Eastern Europe: Regional Profile<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Central Asia and Eastern Europe offer fertile ground for retailers. These markets have avoided the stagnation of their more developed Western European neighbors.
\n\u2022\u00a0\u00a0\u00a0 In Turkey and Russia, retail expansion is fueled by strong consumer demand and high levels of disposable income.
\n\u2022\u00a0\u00a0\u00a0 The modern retail environment is becoming more diverse in these markets, with sectors such as luxury, apparel, and consumer electronics booming and quickly expanding outside of major cities.
\n\u2022\u00a0\u00a0\u00a0 Smaller countries such as Georgia and Kazakhstan may not be the first destinations for international retailers, but their growing pockets of wealth, improving economic stability, and consistent growth have proven attractive to specialty retailers. These markets are adopting modern retail formats, providing a window of opportunity for international retailers to establish presence in the region.<\/p>\n

Country Specific Highlights: Turkey<\/strong><\/p>\n

Growing and attractive<\/strong>
\nWhile Western Europe struggles, Turkey continues to grow. It moves up seven spots in the GRDI to take 6th place\u2014its highest ranking since 2003.<\/p>\n

Key Factors propelling growth<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Growing economy
\n\u2022\u00a0\u00a0\u00a0 Favorable consumer demographics
\n\u2022\u00a0\u00a0\u00a0 Relatively fragmented retail landscape
\n\u2022\u00a0\u00a0\u00a0 Disposable income has increased at a CAGR of 3.6 percent since 2005, while the percentage of households earning less than $15,000 dropped from 53 percent to 45 percent.
\n\u2022\u00a0\u00a0\u00a0 The middle class’s expanding purchasing power is spurring sales growth, while wealthy locals and international tourists are increasing luxury goods sales.<\/p>\n

Market Dynamics<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Modern formats account for only 40 percent of retail in Turkey, but new malls, e-commerce, and international entries will increase this share.
\n\u2022\u00a0\u00a0\u00a0 Modern formats now make up 46 percent of a fragmented grocery market, with the top five grocers accounting for roughly one-tenth of the market.
\n\u2022\u00a0\u00a0\u00a0 Independent convenience stores called bakkals remain popular but are slowly losing share. Modern grocers are aiming for bakkals’ share by opening smaller shops, and hard discounters are making gains with price advantages.
\n\u2022\u00a0\u00a0\u00a0 Shopping malls are now expanding to unexploited regions where traditional retail reigns, while e-commerce has grown 25 percent per year since 2007.<\/p>\n

Country Specific Highlights: Russia<\/strong><\/p>\n

Spending slowdown, but still attractive.<\/strong>
\nAlthough GDP growth is slowing in 2013, retail spending continues to develop, and Russia (23rd) remains attractive to retailers.<\/p>\n

Key Factors propelling growth<\/strong>
\n\u2022\u00a0\u00a0\u00a0 First, Russia is entering the first stage of maturity, in which consumers don’t necessarily cut their spending during turbulent times, but instead start spending wiser.
\n\u2022\u00a0\u00a0\u00a0 Second, while Moscow and St. Petersburg are increasingly saturated, retailers are moving into other regions of Russia, which has 42 cities of 500,000 or more people.<\/p>\n

Market Dynamics<\/strong>
\n\u2022\u00a0\u00a0\u00a0 Modern retail space and infrastructure remain in short supply, increasing the upfront costs and time to enter the market.
\n\u2022\u00a0\u00a0\u00a0 The food sector continues to expand. Major Russian grocers, including X5 Retail Group and Tander, are seeing double-digit yearly growth and enjoying solid margins.
\n\u2022\u00a0\u00a0\u00a0 Consumer electronics is another compelling sector in Russia, with growth of 30 percent or more expected between 2013 and 2016.
\n\u2022\u00a0\u00a0\u00a0 Consumers’ increasing sophistication has stimulated the beauty and luxury sectors. Ralph Lauren, Chanel, and Cartier opened new stores recently, and Sephora entered in 2012.<\/p>\n

<\/a>The GRDI reflects continual change across the global retail landscape. But the role of developing markets \u2013 both big & small \u2013 as sources of growth hasn\u2019t changed. Even amid the global economic uncertainty, the leaders are seeking success by tapping into the fast growth of developing markets.<\/p>\n

Focus: India in the Global Marketplace<\/strong>
\nA comparison of India\u2019s rating in the GRDI between 2009 and 2013 shows that the country has moved down 13 places in the rankings.<\/p>\n

An analysis of the GRDI\u2019s components shows the reasons for this decline. The Global Retail Development Index ranks countries on 4 parameters: Country & Business Risk, Market Attractiveness, Market Saturation and Time Pressure.\u00a0 In the last four years, the international retail community sees increased Country Risk \u2013 due to the perceived \u2018political stagnation\u2019 and the increased difficulty of doing business in India.\u00a0 The country, continues to grow on all consumption parameters in the Index.<\/p>\n

For an international retailer, timing of market entry is one of the key factors in creating value from its overseas businesses.\u00a0\u00a0 A look at the GRDI window of opportunity graph suggests that the market opportunity in India is maturing since 2006 \u2013 i.e. the opportunity to gain a competitive advantage over peers is closing.<\/p>\n

The fact that India continues to grow on all consumption parameters means that the country occupies the same position as a \u201cfundamentally sound, undervalued stock\u201d to use Warren Buffet\u2019s language.\u00a0 For those who believe in the inherent power of consumption and are view retail as a long term business \u2013 the market represents an intriguing opportunity to invest at what is possibly, the bottom of the business cycle.<\/p>\n","protected":false},"excerpt":{"rendered":"

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