Chile is #1 Destination for Emerging Market Retail Expansion, according to the 2014 A.T. Kearney Global Retail Development Index™ - FOX Carolina 21

Chile is #1 Destination for Emerging Market Retail Expansion, according to the 2014 A.T. Kearney Global Retail Development Index™

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SOURCE A.T. Kearney

Sub-Saharan Africa is a new opportunity for retailers

Regional retailers are using their local knowledge to challenge global retailers

CHICAGO, June 16, 2014 /PRNewswire/ -- Chile ranked first place in the 2014 A.T. Kearney Global Retail Development Index (GRDI).  With Uruguay, Brazil, Peru, Panama, Colombia, Costa Rica and Mexico also in the index of top emerging economies ready for retail expansion, Latin America continues to show strength as a regional retail growth market. Published since 2001, the GRDI ranks the top 30 developing countries for retail investment worldwide (please see chart below). The Index analyzes 25 macroeconomic and retail-specific variables that help retailers devise successful global strategies to identify emerging market investment opportunities.

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With Nigeria, Botswana, and Namibia also ranking in the index, Sub-Saharan Africa is also expanding into another exciting regional retail opportunity, too. Mike Moriarty, A.T. Kearney partner and co-author of the GRDI noted, "With GDP growth of 5 percent, rising household incomes, fast urbanization, and a growing middle class, Sub-Saharan Africa is a region of massive potential for retailers."

Although there were some notable retail contractions in the past year – Walmart pruned its portfolio in China and Brazil, and Tesco took a more cautious approach to China - most global retailers are continuing their push into developing markets.  Hana Ben-Shabat, A.T. Kearney partner and GRDI co-author noted, "In our analysis we found that there were fewer emerging market expansion retail failures than in years past. Global retailers have learned from past mistakes and have become much more adept and successful with their emerging market expansion strategies. E-commerce is also helping with global expansion as retailers are able to test a market and build their brand through e-commerce before they expand with brick and mortar stores."

The report also found that regional retailers are becoming players in emerging markets by using their proximity as a competitive advantage to steal share in neighboring markets. Chile's Falabella and Cencosud have begun aggressive growth plans to widen their footprint across Latin America, and UAE-based LuLu Hypermarkets and Majid Al Futtaim have begun expanding in the Gulf region. South African retailers Shoprite and Woolworths have spearheaded Sub-Saharan Africa's shift to modern retail with expansion to Nigeria, Botswana, and Namibia.

The 2014 GRDI also includes a special report on the countries that have moved out of the GRDI rankings over time. Some of these countries have matured and are no longer considered emerging markets, while others have stalled due to economic issues or political risk. The list of exits from the GRDI includes Poland and South Korea, which developed into modern retail markets; Bulgaria and Romania, where stalled economic growth delayed retail development; and Algeria and Ukraine, where social and political unrest unraveled retail growth.

GRDI Regional Results

The Full GRDI Report includes detailed commentary for all 30 countries ranked in the Index. Following are some highlights:

Latin America
Latin America keeps its dominating position in the GRDI, with three countries in the Index's top five positions, as an expanding middle class offers lucrative opportunities. This diverse retail ecosystem includes Brazil's (#5) huge market, Chile's (#1) sophisticated mid-sized market, and "small gems" such as Uruguay (#3), where high consumption levels are attractive to luxury brands. While some Latin American countries face economic and political challenges, continued economic and political stability in leading countries has led to increased consumer and investor confidence and created a favorable environment for retail.

International retailers are entering and gaining ground in a highly competitive environment with local and regional leaders. This battle is most intense outside of the region's capital cities, where new markets are emerging as consumers opt for modern retail formats.

Asia
Asia has a number of fast-growing economies that offer fertile ground for retailers, as growing populations, rising incomes, and increasing affinity for modern formats helps retail sales increase rapidly. Modern retail is spreading beyond the largest urban centers to smaller, untapped cities and regions.

The region saw several improvements in the rankings, led by China (#2), which rebounded into second place, Malaysia (#9), which re-entered the top 10 for the first time since 2009, and Indonesia (#15) which moved up four places from last year's ranking. Other Asian countries in this year's Index include Sri Lanka (#18), India (#20), Philippines (#23), and Vietnam (#28).

Even with less-bullish economic growth, China remains impossible for retailers to ignore. Retail sales in the world's most populous country increased 13 percent in 2013 (to $3.7 trillion), and consumer confidence rose.

Middle East and North Africa
The Middle East is a dynamic retail region – with a growing and young population, strong GDP growth, and increasing consumer confidence and spending. With Qatar scheduled to host the FIFA World Cup in 2022 and Dubai recently winning the Expo 2020 bid, the region's construction and infrastructure boom should continue, thereby benefiting retail.

Middle East and North Africa (MENA) consumers are becoming increasingly more demanding, seeking formats to better meet their needs along with more interesting creative concepts. Some markets are saturating, particularly Dubai, and local developers are now expanding across the region. Fewer international companies entered in 2013, but those in the region focused on expanding their footprint and growing local brands. E-Commerce in MENA is predicted to grow from $9 billion in 2012 to $15 billion by 2015, according to a PayPal study.

Central Asia and Eastern Europe
This region's highest-ranked countries are some of the GRDI's most shining "small gems" – countries such as Armenia (#6), Georgia (#7), Kazakhstan (#10), and Azerbaijan (#30) whose location and unsaturated retail environment makes them attractive options for international retailers. On the other end of the spectrum is Russia (#12), which leaped back up the rankings this year as its retail potential outweighed the country's lingering risks.

Sub-Saharan Africa
Africa is marked by distinct regional differences. In the West, Africa's most populous region, international retailers including Walmart and Carrefour, have succeeded in navigating the challenging business landscape, targeting middle- and high-income consumers who are brand conscious and want convenience, quality and variety.

The East is untapped and increasingly attractive, as the largely informal markets feature few international retailers. Regional retailers dominate the region targeting all income segments.

In the South, the most developed region with stronger infrastructures, high incomes, and macroeconomic stability, South African retailers lead the growth with their close proximity and cultural alignment. Regional and local retailers are leading the e-commerce push, particularly among affluent consumers.

To read the full 2014 GRDI Report, please go to www.grdi.atkearney.com.

2014 Global Retail Development Index Ranking


Country

2014 Rank

2013 Rank

Change

Chile

1

2

+1

China

2

4

+2

Uruguay

3

3

--

United Arab Emirates

4

5

+1

Brazil

5

1

-4

Armenia

6

10

+4

Georgia

7

8

+1

Kuwait

8

9

+1

Malaysia

9

13

+4

Kazakhstan

10

11

+1

Turkey

11

6

-5

Russia

12

23

+11

Peru

13

12

-1

Panama

14

22

+8

Indonesia

15

19

+4

Saudi Arabia

16

16

--

Oman

17

17

--

Sri Lanka

18

15

-3

Nigeria

19

--

New Entry

India

20

14

-6

Colombia

21

18

-3

Jordan

22

20

-2

Philippines

23

--

New Entry

Costa Rica

24

--

New Entry

Mexico

25

21

-4

Botswana

26

25

-1

Morocco

27

27

--

Vietnam

28

--

New Entry

Namibia

29

26

-3

Azerbaijan

30

29

-1

About A.T. Kearney
A.T. Kearney is a global team of forward-thinking partners that delivers immediate impact and growing advantage for its clients. We are passionate problem solvers who excel in collaborating across borders to co-create and realize elegantly simple, practical solutions and sustainable results. Since 1926, we have been trusted advisors on the most mission-critical issues to the world's leading organizations across all major industries and service sectors. A.T. Kearney has 59 offices located in major business centers across 40 countries.

About the A.T. Kearney Global Consumer Institute
The A.T. Kearney Global Consumer Institute is a worldwide network of professionals and executives. The Institute combines proprietary and public data resources with local knowledge to deliver strategic and operational insights to executives in consumer-facing industries seeking long-term growth and competitive advantage. For more information, please contact gci@atkearney.com.

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