Retail Expansion: A Two-Way Street
While the recession has left the retail landscape in developed markets with fewer stores, heavier discounting and more fickle customers, developing markets have been relatively unscathed. The 2010 A.T. Kearney Global Retail Development Index™ reveals that retailers in developing markets appear poised to expand beyond their home markets. Urbanization and a growing middle class are at work in these countries.
The 2010 GRDI finds big things in small packages. While behemoths such as China, India, Brazil and Russia occupy high positions in the rankings, newcomers to the Index include several smaller markets: Kuwait, Albania, Macedonia, the Dominican Republic, and Bosnia and Herzegovina.
Other highlights from the 2010 GRDI include:
Developing markets make inroads abroad. Western retailers moving East are expecting a more dynamic competitive landscape, driven by local retailers improving their market share and regional retailers expanding beyond their home countries.
The BRIC countries remain centers of expansion. Brazil, Russia, India and China remain top priorities for retail expansion into developing markets, according to nearly 80 percent of survey respondents. China tops the GRDI rankings for the first time since 2002, thanks to phenomenal growth in GDP (8.7 percent in 2009) and retail sales (8.2 percent). China has one of the most attractive markets for global retailers because of its strong consumer confidence, increasing urbanization and growing middle class (see figure).
Kuwait and the Middle East move up. The Middle East and North Africa (MENA) region represents one of the most exciting retail growth opportunities today, due to higher disposable incomes, a growing urban population and a strengthening middle class. Tiny Kuwait, bolstered by city dwellers with purchasing power, highlights MENA's strong results by taking 2nd place in its first appearance in the GRDI.
Latin America moves into the spotlight. Led by Brazil, Chile, Uruguay and Peru, Latin America has been resilient throughout the recession. In particular, Brazil, which is preparing for the 2014 FIFA World Cup and the 2016 Olympics, has continued to invest in infrastructure and expanding retail space, which will drive the market for years to come. Chile moves up to 6th place, thanks to a modern, competitive retail sector and stores such as Falabella and Cencosud, which are building a strong presence in other Latin American countries.
No Longer "Nice to Have"
Retail executives have learned that their core markets are not nearly as predictable as they would like —with U.S. and European GDP growth in 2010 expected to hover around 3 percent and 1 percent, respectively. Today, reliance on developing countries for future growth is no longer a "nice to have," but a necessity.
For more information, see "Expanding Opportunities for Global Retailers: The 2010 A.T. Kearney Global Retail Development IndexTM" at www.atkearney.com or contact
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