The most attractive emerging countries for global retail expansion.
Retailers are always looking for new hot spots. Global management consulting firm A.T. Kearney’s annual study of ideal regions for global expansion analyzes development via its Global Retail Development Index, with specific focus on grocers and apparel retailers entering emerging markets. Much of a retailer’s expansion is about timing, a key feature in this study. “There is a window of opportunity of five to six years to enter in an emerging market,” said Fadi Farra, senior manager at A.T. Kearney and author of the GRDI study. “If you miss that window, there’s a good chance you will not succeed.” In addition to timing, the GRDI analyzes three other measures: market saturation, market attractiveness and country (economic and political) risk.
India Global Retail Development Index Score: 100 Fadi Farra of A.T. Kearney said India’s GRDI score has been rising for the past few years. “It’s mainly because of the basics. It’s the second-largest population in the world, and the country did more than $300 billion in retail sales last year, $61 billion of which was apparel. Retail apparel sales are expected to grow to $100 billion by 2010.” Farra also noted, “Women are starting to enter into the workforce in India. They are starting to wear nicer clothing in the workplace, which increases spending incentive.”
Russia GRDI Score: 99 Even upscale retailers like Burberry, which opened its second Russian store in Moscow in 2004, are moving into the world’s largest country in terms of area. Why? “Russia is heavily populated, and it is an example of where consumers are shifting from foods to nonfoods,” Farra said. “Even further, there is a stronger interest in — and awareness of — Western style than you would imagine.”
Ukraine GRDI Score: 87 As part of a retail expansion program for Eastern Europe, Giorgio Armani was on the move with store openings back in 2002, WWD reported. The effort included a store in Ukraine: In the capital of Kiev, Armani opened a 3,456-square-foot freestanding Armani Collezioni store. Charriol, the fine jewelry and watch outfit, has made its entry into Kiev, opening a store in June.
China GRDI Score: 83 China, the world’s most populous nation, is a hotbed of activity. Two of the world’s largest retailers are competing for attention. Wal-Mart is shifting its expansion into high gear there, with 47 openings in China to date. But it faces competition from France’s hypermarket chain, Carrefour SA, which has 61 stores in China. The GRDI study stated that China has a $628 billion retail market that is growing more than 9 percent each year.
Slovenia GRDI Score: 82 The GRDI study noted that Slovenia is an attractive destination, partly because of a per capita GDP of $36,405. In addition, its membership in the European Union has brought growth and stability. Grocers like EuroSpin are entering the marketplace, and H&M, Sweden’s trendy clothing retailer, said that it has expanded into Slovenia with two stores, one in Maribor city center, and the other in Ljubljana City Park shopping center.
Latvia GRDI Score: 81 Bordering the Baltic Sea between Estonia and Lithuania, Latvia’s population totals almost 2.3 million. Finland-based Stockmann Group expanded its line of Seppälä stores, a fashion and cosmetics chain for women, children and men in Latvia in 2003. Retailers are moving into the capital of Riga. The first Zara store opened last year, and a new upscale shopping center called Basteja Pasaza has hit the scene in Riga, as well.
Croatia GRDI Score: 80 Marks & Spencer, based in the U.K., has planted roots in Zagreb, the capital. Zagreb has its fair share of malls, like The Galleria Importanne, an exclusive shopping center on Ibler Square in the heart of the city. The GRDI study pointed out that the country has a largely urban population and total retail sales growth of close to 40 percent over the past two years.
Vietnam GRDI Score: 79 The busy streets of Hanoi, Vietnam, whose population exceeds 3 million, are getting even busier: Levi Strauss & Co., the San Francisco-based jeans and apparel retailer, opened its first franchised jeans outlet in Vietnam in May. The store opened at a shopping center in Hanoi. The company plans to open more stores. Another recent entrant to the country is Parkson, a Malaysian retail chain, which hopes to build 10 outlets in the next five years.
Turkey GRDI Score: 78 The latest news in Turkey is the opening of Burberry’s first store in Istanbul. Ikea, the home furnishings and accessories retailer, opened its first store in May in Istanbul, as well. “Overall, the Mediterranean region has been fairly attractive,” A.T. Kearney’s Farra said. “The political environment is not affecting retail, and though retailers have been expanding, the saturation level for Turkey is still quite low.”
Slovakia GRDI Score: 77 Retail powerhouse Tesco expanded in Slovakia this past year with seven openings, including five compact hypermarkets. As a result, U.K.-based Tesco was named “Top Retailer for 2004,” by the Association of Trade in Slovakia. Activewear giant Quiksilver also has a location in Slovakia. Peter Bloxham, vice president for Quiksilver Europe, told WWD last year, “Each country offers a different type of potential. It’s the youth culture that drives the market here.”
Chile GRDI Score: 76 Chile’s GDP per capita is high, and the saturation level of food retailers is being dominated by local companies. “There are virtually no foreign food retailers in Chile,” said Farra, who pointed out that low foreign saturation levels can heighten the attractiveness of a market. Other nonfood foreign retailers are making their moves, such as Polo Ralph Lauren, which has six freestanding stores throughout the country.
Thailand GRDI Score: 75 The GRDI study said the economic impact of last year’s tsunami disaster has not been as traumatic as initially feared. Tesco is one of the retailers with the biggest foreign presence in Thailand. There are 107 stores of various formats employing a total of 23,000 people. Tesco’s flagship “green” store in Bangkok is part of its energy conservation campaign — the store contains solar panels that cover more than half of the roof (the largest rooftop solar energy system in the region
Bulgaria GRDI Score: 73 Schwarz Group's food retailer Kaufland plans to open 40 superstores in Bulgaria, according to the GRDI study, which also focused on the low retail saturation level of the country located in southeastern Europe, between Romania and Turkey.
South Korea GRDI Score: 72 Ten years ago, South Korea was considered a top market for retail entry. Much of its descent in ranking has to do with the fact that the country has become more saturated with retailers, along with recent economic disparities. These two factors have, however, contributed to consumers wanting to become more price-conscious and value-oriented, giving discount retailers such as Wal-Mart and Kingfisher plc's B&Q Home Store (a DIY chain) the opportunity to take advantage and move in — letting South Korea remain in the top 15.
Tunisia GRDI Score: 71 Located in northern Africa, Tunisia's stable economy and political climate make it an attractive climate for retail expansion, along with its strong GDP growth of 5 - 6 percent. The GRDI study observed that with the exception of Casino and Carrefour SA, there are very few retailers have taken over the market in Tunisia — with such low saturation levels, it is a market to be considered at this point.
Sources: A.T. Kearney analysis, Euromoney database, and World Bank reports. The Global Retail Development Index ranks emerging countries on the urgency for retailers, including grocery and apparel retailers, to enter the country. The scores are based on 25 variables across four primary categories: economic and political risk; market attractiveness; market saturation; and time pressure (difference or addition between gdp and modern retail area growth).
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