Emerging markets are transforming the landscape of the retail industry, as more players eye expansion in the fast-growing economies of China, India and Russia, said executives at the World Retail Congress here last week.
BARCELONA — Emerging markets are transforming the landscape of the retail industry, as more players eye expansion in the fast-growing economies of China, India and Russia, said executives at the World Retail Congress here last week.
"This is the best time ever to be in the retail industry," said Sir Terry Leahy, chief executive officer of Britain's Tesco. "There are more opportunities than ever."
Several retailers said they wanted to bridge into rising markets, including Carrefour ceo Jose Luis Duran, who repeated that the French hypermarket operator was in talks with potential partners to open in India and it was going to enter Russia, too.
Duran said those markets would hold great potential. "We see a huge opportunity to grow internationally, whether in Poland, Brazil or China," he said.
Terry Lundgren, chairman, president and ceo of Federated Department Stores, also said he was in the early stages of investigating the "global expansion" of the Macy's and Bloomingdale's banners.
"It would have to be a meaningful opportunity," stressed Lundgren, who added it was only a matter of time before a major U.S. retailer became bullish about overseas expansion.
Saks Fifth Avenue and Harvey Nichols already have opened stores in the Middle East, and this month France's Galeries Lafayette said it would kick-start its own international expansion strategy with a store to open in Dubai. Saks, which operates its overseas stores with a franchise partner, also is planning to launch a store in Shanghai, and Harvey Nichols has one in Hong Kong.
Delegates at the conference prominently mentioned the importance of finding the right formula to crack into markets in Asia, and they bemoaned regulations that created red tape barriers to business.
Pascal Lamy, director of the World Trade Organization, spoke via video link to warn of the ramifications of a failure in the current Doha round of global free trade talks, which are struggling with agricultural subsidies and tariffs.
"Globalization has formidable advantages," said Lamy, as he outlined the political dangers of disagreement on the round, which, he said, would require great political will from the United States and the European Union if an agreement was to come by yearend."[An agreement] is doable, it's not yet done and we need political traction for a final breakthrough," said Lamy. He added: "Failure of the round is a scenario which we all need to have in mind. If we are really responsible, given the state of negotiations, we need to consider this scenario."
For retailers, Lamy said the consequences of a failed round would undermine the WTO system and its series of safeguards against protectionism, while a successful conclusion would, besides doing away with tariffs, begin a cycle to diminish regulatory restrictions in real estate ownership or in the types of products foreign retailers can carry.
Adapting to emerging markets marked a significant subject of debate among speakers, with many outlining the importance of tailoring an offer to local demand and finding the right partner with whom to do business.
Carrefour's Duran, for instance, told how the retailer had staved off a downturn in its business in Argentina a few years ago by abandoning a centralized pricing system and creating a flexible store-by-store alternative, while also catering product assortments especially for each store. Carrefour, as a result, has logged three years of double-digit growth in Argentina, Duran said.
Considering many retailers, from Carrefour to Tesco, already have entered China aggressively, delegates emphasized the attraction of India as Asia's next great frontier — though China remains largely untapped and a great source of potential growth.
"Asia is going through profound change," said Ravi Thakran, group director of Southeast Asia for LVMH Moët Hennessy Louis Vuitton. "No market gives brands the opportunity of Asia today."
"But there isn't one Asia," he said. "The challenge is to get deeper understanding [of the consumer landscape]."
For instance, Thakran said while one part of India gravitates by heritage to pomp and show, another is prone to understatement. Another obstacle for retailers is to challenge the intricate web of mom-and-pop shops in India that have cultivated direct relationships with their clientele for years.
But the potential rewards largely outweigh drawbacks. After all, the population boom alone in Asia is enough to tempt retailers to aggressively grow in the region.Jim O'Neill, global head of economic research at Goldman Sachs International, gave a detailed presentation on the shape of the world's population in 2025 and what it would mean for the global economy.
"Population changes have become the key to the future of world growth," he said.
Although O'Neill said although the world's current wealthiest consumers would remain the wealthiest in the near future, some countries are growing at such a rate that they will join the elite club soon.
Russia, for instance, could become as rich as the world's wealthiest nations in per capita household income by 2025, O'Neill said. Korea also is on track to become as wealthy in per capita income as the U.S. or Japan.
Although the opportunities of emerging markets dominated a large chunk of the conference, it was hardly the only focus. Green consumption and the information revolution also got attention.
Tesco's Leahy, for instance, said the way in which retailers deal with environmental concerns might become the biggest single issue in the future.
"Customers are more and more aware of climate change," he said. "I think we need to give customers the tools to do something, too."
How exactly more acute consumer concerns about the environment will be played out commercially is anyone's guess. But already a green consumer agenda has had an impact at retail with huge growth of organic foods and green clothing, executives said.
"We need a huge change," said Leahy, adding that Tesco was taking steps to open green stores. "We are a high carbon industry."
Another British retailer moving to improve its environmental commitment is Marks & Spencer, which has pledged to be carbon neutral in five years and to eliminate its waste to landfill in that same period.
Strangely enough, the Internet is playing a significant role in rising green concerns. That's because more consumers use the Web to connect to retailers and inform themselves about retailers' practices and products, making for a highly sophisticated consumer.
"Sophisticated people expect us to understand their needs," said Concetta Lanciaux, the former head of human resources at LVMH and an adviser to the luxury group's chairman, Bernard Arnault."Consumers are becoming more demanding in quality and fashion," said Pablo Isla, Inditex's ceo.
Wrapping up the event, the congress honored international retailers with prizes during a black-tie gala dinner. Kate Moss, who did not attend, was named the consumer icon of the year.
Meanwhile, other honorees included the most innovative store format (American Girl Place), best retail destination (Dubai's Mall of the Emirates) and the retailer of the year (Inditex).
“My personal philosophy to beauty is paying attention to oneself. I love to be outdoors, lots of fresh air, trying to take care of yourself as best you can. I always notice that comes through,” says Felicity Jones, the global face of @shiseido-owned @cledepeaubeauteus, which launches today. Head to WWD.com to read more about the actress’ love for beauty and how she prepared for her new role in “The Basis of Sex,” playing the young Ruth Bader Ginsburg. #wwdbeauty (📷: @dandoperalski)
For men’s fall 2018, @giuseppezanotti drew on elements from streetwear, sport, biker, combat and rock ‘n’ roll. Pictured here are a pair of shoes from the collection, featuring zippers, rhinestones, and silver hardware. Head to WWD.com to see a roundup of the accessories from Milan’s men’s fall 2018 shows. #wwdfashion (📷: Andrea Delb)
To celebrate the 25th anniversary of @ralphlauren’s snowboarding collection, the brand is mining its archives. The iconic brand is reintroducing vintage styles and dropping new designs for a color capsule that will be available in Ralph Lauren stores and @openingceremony on January 25. The capsule will consist of 10 pieces, including the Snow Beach Pullover, pictured here, which is a collector’s item that rapper Raekwon wore in Wu-Tang Clan’s “Can It Be All So Simple” video. #wwdfashion (📷: Tom Gould)
For @rochasofficial’s pre-fall 2018 collection, creative director Alessandro Dell’Acqua channeled the sophisticated and intriguing Catherine Denevue in the film “Belle de Jour.” Polished collarless coats, midi skirts, suits and ’60s graphic motifs were all featured in the collection, adding a sense of discreet luxury. See the rest of the photos on WWD.com #wwdfashion
“We tried to produce clothing of that couture quality, but the most daunting part was that we only had a matter of days [to do it],” said costume designer Lou Eyrich, who recreated Gianni Versace’s iconic looks for @americancrimestoryfx. Eyrich searched online retailers and vintage shops for original pieces from the design house and for @penelopecruzoficial, who plays Donatella Versace. Head to WWD.com to read how she created the Versace world. #wwdfashion
Only three months after her stellar debut catwalk season, @kaiagerber has inked her first big design collaboration –– with @karllagerfeld. The collection blends Lagerfeld’s Parisian chic aesthetic and the model’s signature West Coast casual style via RTW, accessories, footwear and more. The #KarlLagerfeldxKaia collection will launch in September with a series of events. Get all the details on WWD.com. #wwdnews #wwdfashion
Harrods plans to remove the famous statue of Princess Diana and Dodi Al Fayed from the bottom of the Egyptian escalators and hand it back to Mohamed Al-Fayed. “We are very proud to have played our role in celebrating the lives of Diana, Princess of Wales and Dodi Al Fayed at Harrods and to have welcomed people from around the world to visit the memorial for the past 20 years,” said Michael Ward, Harrods managing director. “With the announcement of the new official memorial statue to Diana, Princess of Wales at Kensington Palace, we feel that the time is right to return this memorial to Mr. Al Fayed and for the public to be invited to pay their respects at the palace.” More on the news, with reporting by @loreleimarfil, at WWD.com. #wwdnews