Emerging Markets Offer Growth Opportunities for Apparel Retailers Battling Declines in Domestic Consumer Spending
Brazil is Most Attractive Emerging Market in A.T. Kearney 2009 Retail Apparel Index
(Chicago) – Brazil is ranked as the most attractive emerging market for apparel retailers for the second year in a row according to a study by global management consulting firm A.T. Kearney. The ranking was driven by Brazil’s large total clothing sales, young population and its high annual clothing sales per capita.
Brazil finished ahead of Romania and China in the 2009 A.T. Kearney Retail Apparel Index, which analyzes market growth and consumer indicators for 30 emerging market countries. “In addition to the strong market indicators for apparel, Brazil is in a strong economic position compared to the rest of the region. A proactive government economic stimulus package and lower inflation rates will drive consumer spending,” said Hana Ben-Shabat, a partner with A.T. Kearney and co-leader of the study.
Brazil’s strong showing in the index is driven by its large total clothing sales, second only to China, and its annual clothing sales per capita, which tops the Index at $490. Not only do Brazilians buy large quantities of apparel, the five year growth rate of consumption, at more than 20 percent, is staggering. Brazil’s vibrant young population is also a major factor in its ranking – more than 60 percent of the population is under the age of 39. Brazil’s relatively young population is extremely fashion conscious with a strong sense of celebrity culture.
Romania makes the biggest leap on the Apparel Index, climbing four spots to second place, fueled by growth in total clothing sales, and clothing sales per capita, over the past five years. Romania’s young population, those between the ages of 15 and 39, is growing at a faster rate than China’s or Brazil’s. Another appealing factor for retailers is that more than half of the Romanian population lives in urban centers. A doubling in available leasable area in Romania’s shopping malls provides a springboard for apparel retail.
China was third in the Index, driven by the highest growth in GDP purchasing power parity per capita over the past five years (6.5 percent) and the largest total apparel sales of any country on the Index. In the past, retailers viewed China solely through the lens of the luxury market and high net worth individuals. The mass market in China is becoming more attractive as tastes change and mass market fashion brands become more widespread.
“The Chinese apparel market has seen a gradual shift to specialty apparel stores, as the average Chinese consumer becomes more discriminating about their wardrobes,” said Mike Moriarty, A.T. Kearney partner and co-leader of the study. “This trend presents an excellent opportunity for specialty retailers to expand into China.” The remaining top ten markets in the 2009 A.T. Kearney Retail Apparel Index include India, Argentina, Ukraine, Chile, Russia, Saudi Arabia, and Turkey (see chart below).
About the study A.T. Kearney’s Retail Apparel Index is calculated by analyzing market, growth and consumer indicators, which are weighted 35 percent, 50 percent and 15 percent, respectively. Market indicators include total clothing sales and imports, total population, youth population, and the presence of international apparel retailers. Growth indicators consist of the CAGR of total clothing sales, clothing imports, clothing sales per capita, GDP per capita and population growth. Consumer affluence is measured by clothing sales per capita. Within each metric, a country’s value is indexed from 0 to 100 to allow for relative comparisons to be made across metrics. For example, Romania had the highest clothing sales CAGR of 35 percent from 2004 to 2008, giving it a score of 100 points for that metric. Brazil’s clothing sales CAGR over the same period was 23 percent, resulting in a score of 65.
About A.T. Kearney A.T. Kearney is a global management consulting firm that uses strategic insight, tailored solutions and a collaborative working style to help clients achieve sustainable results. Since 1926, we have been trusted advisors on CEO-agenda issues to the world’s leading corporations across all major industries. A.T. Kearney's offices are located in major business centers in 36 countries. For more information, please visit www.grdi.atkearney.com.