New York City, China and India are the top emerging growth markets for retail and consumer investments, followed by Vietnam, Turkey, Russia, Romania and Bulgaria according to a new study from Pricewaterhouse Coopers. The survey, “From Beijing to Budapest: Winning Brands, Winning Formats,” shows that achieving a presence in these transitional markets can be challenging, and that only those companies that develop new products and new formats targeted to the quickly evolving tastes of customers in these regions will be successful.
“Adopting a policy of expansion into one or several of the high-growth markets is a strategic must for U.S. retail and consumer companies,” said Jacques-Etienne de T’Serclaes, PricewaterhouseCoopers Global Retail & Consumer Leader. “To succeed in transitional economies, companies must consider the specific challenges they face in expanding before realizing the opportunities that lie ahead.”
A key finding of the study is that participation in the transitional economies requires foreign retail and consumer companies to create new products and new formats geared to the consumers of these markets. Successful developments of brands in these markets lie in finding the right balance, blend and mix of products, the report says. The global image of world-class brands needs to be balanced with a keen sensitivity to local tastes.
Other key findings contained in the survey include:
• Partnering with local firms remains the most viable strategic option for both new and foreign entrants and for investors wishing to consolidate their operations in the transitional economies.
• Franchising is an alternative path of entry into the transitional markets.
• Companies developing their operations in these economies are capitalizing on their presence there by off shoring certain business processes to the countries in which they are present and sourcing goods locally.
• Attracting and retaining good staff is the top challenge of the transitional market challenge for foreign and local companies alike. In China, there is fierce competition for a limited number of top candidates, particularly in the marketing area, resulting in high staff-turnover rates.
• A polarization of formats between discount and upscale stores is a general trend across both the Asia and Central and Eastern Europe markets.
• Infrastructure is still a major problem in many transitional markets, but local governments are rapidly addressing it.
The survey provides a broad picture of the economic, social and cultural backgrounds of 20 transitional economies in Asia, Central and Eastern Europe and highlights the challenges and opportunities for retail and consumer-goods companies wishing to invest in these markets. For more information on the study, see www.pwc.com/growth.