Asian retail markets slip in global ranking

KUALA LUMPUR: The attractiveness of Asian countries including China, India and Malaysia as global retail havens slipped this year as South American entities gained prominence as the top favourite markets in retail expansion.

According to the latest annual Global Retail Development Index (GRDI) by consulting firm AT Kearney, the 2011 GRDI ranking mirrors the dramatic changes which have taken place in global markets, and the varying impacts they have had on different emerging economies.

"In the last 10 years it has become clear that there is no 'one size fits all' formula for global expansion.

"Different countries are at different levels of development and have different risk/return profiles, which require retailers to tailor their approaches accordingly and assemble a portfolio of markets to balance short-term risk with long-term growth aspirations," said AT Kearney.

Findings from the 2011 index which assessed 30 emerging economies showed that China's ranking had slipped to sixth this year from first in 2010, while India was down a notch to fourth place from third. Malaysia retreated to 21st from 17th previously.

Across the globe in South America, Brazil jumped to first place from fifth previously while Uruguay leapt to second place from eighth a year earlier. Chile improved to third from sixth.

AT Kearney said: "Brazil is an attractive target expansion market given its expected GDP growth of 5% annually over the next five years, a large and highly urban population, and surging retail sales.

"In addition to the substantial investment in infrastructure the Brazilian government is planning, inflows of foreign capital are rising dramatically as well."

Uruguay seen as riding on Brazilian coattails posted a significant GDP growth of 8.5% in 2010. The country's limited scale combined with positive macroeconomic conditions make it an interesting choice for retailers seeking to expand into more contained markets, according to the consulting firm.

Middle Eastern markets were also identified among the top 10 retail expansion spots in the latest GRDI although their rankings had also slipped.

Kuwait came in fifth from second previously while Saudi Arabia fell to seventh place from fourth. The United Arab Emirates (UAE) which includes Dubai and Abu Dhabi was ranked ninth from seventh previously.

AT Kearney noted that Kuwait, Saudi Arabia and the UAE have not experienced the turmoil seen in neighbouring countries and are expected to remain stable. Over the last 10 years, the consulting firm said regions had opened to global retail at different times. In the early 2000s, the focus was on Eastern Europe as those markets gained membership in the European Union. China's acceptance into the World Trade Organisation in 2001 also marked the opening of that market to trade and investment.

These market expansions were followed by Southeast Asia, Latin America and the Middle East. Africa will soon be a focus region for global retailers.

The last 10 years of global retail expansion have shown that driving consistent, profitable performance is a challenge.

AT Kearney's GRDI ranks 30 emerging countries on the urgency for retailers to enter the country. The scores are based on 25 variables across four primary categories including economic and political risks, market attractiveness, market saturation and time pressure.