The top emerging countries for global apparel retail expansion.
This story first appeared in the June 5, 2008 issue of WWD. Subscribe Today.
“There is a lot of pressure on retailers today, and they are looking for new avenues for growth,” noted a recent report from management consulting firm A.T. Kearney. The firm’s Retail Apparel Index, an offshoot of its Global Retail Development Index, ranks the attractiveness of emerging countries for investment. The top 30 emerging markets for retail apparel investments were scored on several drivers including risk, market attractiveness, how many competitors there are and the time-pressure urgency to get into that market. “This study identifies where windows of opportunity are opening up for global retailers, and also for local and regional retailers who want to invest in the development of organized retail,” said Mike Moriarty, partner and leader of A.T. Kearney’s consumer industries and retail practice.
Retail Apparel Index score: 48.2
This country’s high spending on apparel and significant clothing imports — along with its consumers’ preference for the latest fashions — make it the most attractive emerging market destination for apparel retailers, according to A.T. Kearney’s study. “A lot of income is dedicated to this category” in Brazil, noted Ram Kuppuswamy, manager and research leader for A.T. Kearney. “Brazil’s high ranking also reflects the fact that there’s a strong domestic manufacturing base that exists here.” According to the firm, the country is young, with more than 60 percent of the population below the age of 29, and consumers spend $402 per capita annually on apparel. International retailers such Mango, Miss Sixty and Zara have entered the region.
“China is a dynamic market right now, but if you’re looking to enter the region, you have to have a more unique format, a more sophisticated approach, or you have to enter the second- or third-tier cities, because the very best opportunities have been snagged up,” said Moriarty. China has one of the largest retail apparel markets in the world, valued at $84 billion. WWD reported last month that Coach unveiled a 9,400-square-foot store in Hong Kong’s bustling Central District. Dolce & Gabbana stores will open in China’s second-tier cities Nanjing, Shenyang and Dalian before the fall. Moriarty pointed out that international entrants will want to adapt to the Chinese consumer’s fashion sense. “People here have different color palettes and different design tastes, but brand names are extremely important to the consumers, and they’re willing to pay extra money for them.”
Apparel retail growth is on the rise in India, thanks to a booming middle class, along with the increase in apparel-driven shopping malls. Said Kuppuswamy, “Women’s wear in India has come to the forefront over the last three to four years. As more women have started to enter the workforce, the attitudes in apparel are changing, and so is the interest level. Women now have the means to support a lifestyle that invests a lot more in apparel — they love wearing Western-style fashions to work.” Like many luxury goods players, Salvatore Ferragamo SpA is beefing up its presence in India. The Italian company said in May it plans to open 10 stores there by 2013 — including three this year — after launching a joint venture with local real estate company DLH. And both Gucci and Bottega Veneta landed in Mumbai (left) in 2007.
Dolce & Gabbana, Chloé, Jimmy Choo, Coach and Prada are just a few of the apparel names that, during the last 12 months “have opened their first monobrand stores with Turkish partners in the country’s biggest and richest city [Istanbul, left], as the luxury market spreads to an increasingly affluent middle class,” WWD reported in January. One of the best examples of the growing market, noted WWD, was the opening of luxury mall Istinye Park last fall. The mall contains brands such as Chanel, Dior, Celine and Fendi. The market shows no signs of slowing down for luxe retailers — Bottega Veneta is steadily expanding its retail network into new markets such as Turkey.
In Chile’s capital of Santiago (left), Parque Arauco is one of the area’s best-known malls. A few shops housed here include Ferragamo, Versace, Polo Ralph Lauren, Valentino and Zara. The country’s largest department store, Almacenes Paris, is also located here. Another apparel retailer in the city is Brooks Brothers, which opened here in April 2006. The “Drugstore,” on Avenida Providencia between Las Urbinas and Avenida de Fuenzalida, features funky, eclectic local boutiques. And Chile’s version of Rodeo Drive is Alonso de Córdova in Vitacura, where local upscale boutiques can be found that offer furniture, apparel, household goods and jewelry.
Romanians are currently spending about one-tenth on apparel of what Italians and Austrians spend, indicating this country has high growth potential, stated the study: “The accession to the European Union in 2007 has since paved the way for rapid retail growth.” Elie Tahari revealed plans earlier this year to roll out internationally through partnerships, including one with Unitim to build a branch in Romania. Louis Vuitton also has plans to open in the country, WWD reported in February. “Growth prospects in this country are perking up,” added Moriarty. “Romania’s per capita income and apparel market are both strong here.” The study noted Inditex Group has been in Romania since 2004, through a local partnership with Azali Trading. The Spanish company operates stores under the Zara, Pull and Bear, Bershka, Stradivarius and Oysho brands.
The study noted that “2007 saw the reentry or launch of a number of significant luxury brands in Argentina: Valentino, Salvatore Ferragamo, Ermenegildo Zegna, Chanel, Gucci, Rochas, Gianfranco Ferré.” Other high-end retailers, such as LVMH-owned Kenzo, are returning to Argentina on the back of the strong economic recovery following the country’s financial crisis in 2001. Armani also has become more aggressive about expanding in Argentina, recently opening three A|X Armani Exchange stores in three shopping malls here. With its now rapidly expanding economy, “increasingly wealthy Argentines have a growing taste for fashion and luxury. And major brands are beginning to take notice,” WWD noted in April.
Thailand’s capital of Bangkok (left) is attracting plenty of interested apparel retailers, thanks to sites such as CentralWorld, a shopping center in the heart of the city’s retail district. The 6 million-square-foot center is fully rented and is drawing 150,000 visitors daily, WWD reported. And although retail spending slowed in 2007 as the economy weakened under the military government’s leadership, CPN — the country’s largest retail property manager — is pursuing plans to build four centers totaling more than 8.6 million square feet on the outskirts of Bangkok, at a cost of about $118 million. And current occupants at Gaysorn Plaza, a luxury shopping destination, include Christian Dior, Christian Lacroix, Fendi and Louis Vuitton.
“Opportunities are pretty strong in Russia right now,” Kuppuswamy said. “But because the competition is aggressive, there might be a higher cost of operation. Opening a store in Moscow is turning out to be very expensive right now.” In fact, a 2007 study conducted by Mercer Human Resource Consulting indicated Moscow (left) was indeed the world’s most expensive city. Polo Ralph Lauren opened its first two stores in Moscow in May 2007, under a franchise agreement with Mercury Group. Inditex Group’s Zara, Stradivarius, Bershka, Massimo Dutti and Pull and Bear brands all have locations within the country — the company entered the Russian market in 2003.
10. UNITED ARAB EMIRATES
“Driven by growth in tourism, modern retail space and annual clothing exhibitions, Dubai is positioned as the shopping capital of the Middle East,” stated the study. A lineup of major brands are present in Dubai today, including Yves Saint Laurent, Armani, Ralph Lauren and French Connection. Companies are focusing on associating their presence with significant real estate developments, such as Isla Moda, the world’s first dedicated fashion island. The development is to be completed by Dubai Infinity Holding. Meanwhile, WWD reported last month that CH Carolina Herrera will bow this year in Abu Dhabi (left), another prosperous city in the region.
SOURCE: A.T. KEARNEY’S RETAIL APPAREL INDEX REPORT, AN OFFSHOOT OF THE FIRM’S GLOBAL RETAIL DEVELOPMENT INDEX; SCORES ARE ON A 100-POINT SCALE; SCORES ARE COMPILED BASED ON 10 DRIVERS OF RETAIL ACTIVITY: TOTAL CLOTHING SALES, GROWTH IN TOTAL CLOTHING SALES, CLOTHING SALES PER CAPITA, GROWTH IN SALES PER CAPITA, TOTAL CLOTHING IMPORTS, GROWTH IN CLOTHING IMPORTS, 2007 POPULATION, FORECASTED GROWTH IN POPULATION, GROWTH IN GDP PER CAPITA AND POPULATION BETWEEN ages 15 AND 39
Brazil photo by Laurie Chamberlain/Corbis; china by Redlink/Corbis; india by Christophe Boisvieux/Corbis; turkey by Robert Landau/Corbis; chile by Bertrand Gardel/Hemis/Corbis; romania by Gavin Hellier/Getty Images; argentina by Sergio Pitamitz/Corbis; thailand by Jose Fuste Raga/Corbis; russia by Franz-Marc Frei/Corbis; united arab emirates by Georgina Bowater/Corbis