Political instability in the Middle East and financial challenges throughout Europe and the U.S. are translating into bigger opportunities for retail development in smaller markets.
According to the 11th annual Global Retail Development Index by consulting firm A.T. Kearney, Brazil and Chile maintained their top two spots from the 2011 survey, while China, which fell to sixth last year from the top spot in 2010, was back in third place. The top three were followed by Uruguay, third in 2011, and India, down to fifth this year from fourth last year.
But the top 20 included six nations, among a growing list of “small gems,” that didn’t qualify for rankings last year, including two former Soviet Socialist Republics, led by Georgia at number six and Azerbaijan at number 17. Other new entries included Oman, at eight; Mongolia, at nine; Jordan, at 18, and the first sub-Saharan African market to qualify, Botswana, at number 20. Another member of the former Soviet bloc, Kazakhstan, fell to number 19 from 14th last year.
While the top five included three BRICs markets — Brazil, China and India — the fourth, Russia, fell 15 spots to 26th.
“Six or seven years ago, you saw big retailers, like Wal-Mart or Carrefour, getting into big countries, like the BRICs markets,” said Hana Ben-Shabat, partner at A.T. Kearney and coleader of the study. “Now, with companies not able to get growth from the U.S. or European consumer, everyone is forced to look outside their borders, whether they’re Wal-Mart or Ann Taylor. It’s a small-country story now as well, and some of these smaller markets, like Mongolia or Oman, have growing economies and a growing number of consumers who are open to a new way of shopping.”
The index incorporates four criteria — market attractiveness, country risk, market saturation and time pressure — to assess the opportunities for foreign retailers to develop retail business in various countries. Brazil’s top score of 73.8 included a 100 rating for market attractiveness, 85.4 for market risk (with 100 signifying the least risk), 48.2 for market saturation (with 100 being least saturated) and 61.6 for time pressure (with zero signifying least). Chile scored 65.3.
Optimism surrounding the Arab Spring of 2011 had propelled a number of markets in the Middle East upward in 2011, but the uncertainty that has followed last year’s political uprisings pushed Kuwait down seven places to 12th, Saudi Arabia down four to 14th and Lebanon down 10 to 22nd. Egypt, at number 12 in 2011, fell out of the top 30 entirely as it struggled to gain political and economic stability.
Although South Africa, at number 26 last year, didn’t make the top 30 in this year’s ranking, Ben-Shabat was quick to point out that its failure to do so was attributable mostly to the advanced state of its retail development. “South Africa’s no longer a developing market, but Botswana’s progress is a precursor for more sub-Saharan African markets,” she said. “These markets are becoming more attractive and we’re seeing more consumer goods companies starting to enter them.”