The annual A.T. Kearney Global Retail Development Index™ (GRDI) was designed to help retailers make strategic investments in exciting new markets. Now in its eighth year, GRDI ranks the top 30 emerging markets on a 100-point scale—the higher the ranking, the more urgency there is to enter a country. Results for the 2008 Index, highlighted in the figure, indicate that retailers must be more pragmatic with their market entry strategies. The credit crunch and higher cost of capital mean large-scale expansions on multiple fronts will be difficult to sustain. Indeed, the tough—but familiar—world of global retailing is transforming into a tougher, more unfamiliar, but resolutely more global market.
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The top retail markets in 2008 are as follows:
Vietnam: the shackles are off. Vietnam stole the spotlight this year from the regional behemoths, India and China, with its recently deregulated retail markets. Vietnam is one of the few remaining single-party Communist countries. The country’s leaders are eager to follow China’s blueprint for growth by attracting foreign investment.
India: the retail freeway gets bumpy. For the first time in five years, India’s ranking drops from first to second place in the Index but the country remains among the most attractive markets for global retailers—although they continue to be frustrated by government regulations.
Russia: retail moves into second-tier cities. Russia slips one place to third on the Index. Record high prices for crude oil and natural gas—its main exports—and strong domestic demand are contributing to a booming economy. Russia is especially attractive to foreign retailers experiencing sluggish growth in their domestic markets. Moscow and St. Petersburg are still the most favored destinations, but retail continues to expand into second-tier cities and industrial regions.
China: consumer spending surges. Although China has dropped from number three to number four in this year’s Index, its strong GDP growth makes it one of the fastest-growing economies in the world. Consumer spending has more than doubled since the mid-1990s and is growing rapidly in the large southern and eastern cities.
Overall: Asia grows up. Asia has turned a corner this year. Asian markets have held their own despite the economic turmoil affecting most developed markets such as the United States, Japan and Europe. GDP growth across the region remains strong and will probably top 7 percent on average.
What’s in Store for the Rest of 2008?
This year is shaping up to be a turbulent one for global retailers—the credit crunch may have started in the United States, but it has quickly spread around the globe, creating financing woes for existing and expanding retailers. Although the European markets have fared better so far, this scenario cannot last long given the level of turmoil across the Atlantic. As a result, 2008 will be a landmark year for visionary retailers that differentiate their companies from the competition by expanding into new emerging markets. For large mass market retailers, the message could not be more clear: expand or perish.
( Source: ATKearney )
