A.T. Kearney: Chile and China tops for emerging market retail expansion

Chicago -- Chile is the number one destination for emerging market retail expansion, followed by China, where retail sales totaled a whopping $3.7 trillion in 2013, according to the 2014 A.T. Kearney Global Retail Development Index.

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.

Sub-Saharan Africa is also expanding into another exciting regional retail opportunity, the study found, with Nigeria, Botswana, and Namibia showing up in the ranking.

“With GDP growth of 5%, rising household incomes, fast urbanization, and a growing middle class, Sub-Saharan Africa is a region of massive potential for retailers,” said Mike Moriarty, A.T. Kearney partner and co-author of the GRDI, which ranks the top 30 developing countries for retail investment worldwide. The Index analyzes 25 macroeconomic and retail-specific variables that help retailers devise successful global strategies to identify emerging market investment opportunities.

Although there were some notable retail contractions in the past year — Wal-Mart 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

"In our analysis we found that there were fewer emerging market expansion retail failures than in years past,” said Hana Ben-Shabat, A.T. Kearney partner and GRDI co-author. “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."

Highlights of the study include:

• 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 (No. 5) huge market; Chile's (No. 1) sophisticated mid-sized market; and "small gems" such as Uruguay (No. 3), where high consumption levels are attractive to luxury brands.

• Asia: The region saw several improvements in the rankings, led by China (No. 2), which rebounded into second place, Malaysia (No. 9), which re-entered the top 10 for the first time since 2009, and Indonesia (No. 15) which moved up four places from last year's ranking. Other Asian countries in this year's Index include Sri Lanka (No. 18); India (No. 20); Philippines (No. 23); and Vietnam (No. 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% in 2013 (to $3.7 trillion), and consumer confidence rose.

• Middle East/Northern 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.

The top 10 emerging markets in the survey are listed below:

1. Chile
2. China
3. Uruguay
4. United Arab Emirates
5. Brazil
6. Armenia
7. Georgia
8. Kuwait
9. Malaysia
10. Kazakhstan

To read the full 2014 GRDI Report, visit grdi.atkearney.com.


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