A Game-Changing Year for Global Retailers

With the credit crunch, real estate booms and busts, and uncertainty in the financial markets, three countries—India, Russia and China— are back on top as attractive countries for global retailers, with a rising star, the United Arab Emirates, moving into 4th place. These are among the main findings in the annual A.T. Kearney Global Retail Development Index™ (GRDI).

GRDI is designed to help retailers make strategic investments in exciting new emerging markets. Now in its ninth year, the GRDI ranks the top 30 emerging markets on a 100-point scale. The higher the ranking, the more urgency there is to enter a country. Results for the 2009 Index, highlighted in the figure, indicate that retailers must be more pragmatic with their market-entry strategies. The financial crisis and the higher cost of capital make large-scale expansion on multiple fronts difficult to sustain. However, the current environment also presents unique opportunities in emerging markets where able talent and attractively priced local retailers and real estate make this an ideal time to expand globally.

India reclaims the top spot. India remains one of the fastest-growing countries in the world, and with the lowest inflation in a decade, India is well positioned for further growth. Retailers are tapping Indian shoppers' growing interest in international labels to beat the current slowdown in sales, and new players have raced onto the scene at the same breakneck pace as in previous years.

Figure: GRDI 2009 country attractiveness

Russia is ripe for entry via acquisition. Second in the GRDI this year, Russia remains a fragmented market, and the global financial crisis has left many local players undervalued. Opportunities for acquisition, especially of regional players, exist as the valuations of these companies decline. While Russia's political landscape and financial stability are some cause for concern, it remains an attractive market for short- and long-term opportunities.

China expands beyond tier 1 cities. Although significantly affected by the global downturn, China's projected GDP growth still eclipses most other markets. China's western and central regions are less affected than the coastal areas, making them attractive for expansion or entry.

UAE: Abu Dhabi is primed for growth. The focus for the United Arab Emirates has shifted from Dubai to Abu Dhabi, where increasing wealth and interest in global brands make it an attractive location for global retailers. As Abu Dhabi invests in its hospitality sector, more tourism will lead to more retail sales.

While all of these markets are experiencing slower growth than in past years, they are still growing faster than established economies, providing a platform for future growth for most global retailers.

What's in Store for 2009?
This will continue to be a turbulent, game-changing year for global retailers as opportunities within home markets dry up and emerging markets remain a prime opportunity. Although the current crisis has slowed growth and incomes in emerging markets, wealth and spending is still positive, and resources—real estate and talent—are more accessible than ever. For global retailers with the means and the determination, the GRDI helps provide the vision.

For more information, contact the authors.