Focus on Global Retailing

More than one-third of the world’s 250 largest retailers suffered a decline in sales in fiscal 2009 (encompasses June 2009 through June 2010), according to the Global Powers of Retailing 2011 report, whose results were revealed at the National Retail Federation’s Annual Convention & Expo in New York City. The annual report, from Deloitte Touche Tohmatsu Limited, identifies the largest 250 retailers around the world, provides an outlook for the global economy and an analysis of market capitalization in the retail industry.



The aggregate sales of the Top 250 totaled $3.76 trillion in fiscal 2009, down from $3.82 trillion in 2008, giving them a 25% share of global retail sales ($15 trillion).



“Those figures signify how important retail activity is its significant can’t be overstated,” said Richard Hyman, strategic advisor, consumer business, Deloitte, in a presentation at the NRF show.



Hyman noted that the 250 largest retailers in the world have been losing share of total retail sales since 2003, when they garnered 27.4% of total global sales.



“These retailers have massive scale advantages but they are losing share,” he said. “It appears scale may be a bit less important going forward. Retailers who relied on superior scale for their competitive advantage may have to think about adding a few more ingredients to their strategic armor.”



The world’s 10 largest retailers, led by Wal-Mart Stores, saw their share of total Top 250 sales slip in fiscal 2009, and their composite sales growth was stagnant at 0.2%.



“The top 10 fared less well than the total group of 250,” Hyman said.



But while sales for the global power players were down, profitability showed a marked improvement in fiscal 2009 as retailers tightened their belts.



“Costs have been very well managed, which has improved margins,” Hyman explained. “In fact, the Top 250 composite net profit margin rose to 3.1% in 2009 from 2.4% in 2008. But continuing to keep a lid on costs going forward will be a major challenge for retailers.”



The report also included analysis of the Q ratio of publicly traded companies on the Top 250 list. The Q ratio is the ration of a publicly traded company’s market capitalization to the value of its tangible assets. The higher the Q ration, the greater the share of a company’s value that stems from such intangibles. The composite Q ratio for the Top 250 retailers is 1.144 by comparison, Swedish fast-fashion retailer Hennes & Mauritz (H&M) had the highest Q ratio in fiscal 2009, with a 7.852 score, followed by Turkish discounter BIM (7.475); Coach (6.803); Amazon (5.760); and Apple/Apple Stores (5.362).



“It’s a tremendous testament to the strength of these retailers that they have received such a high rating in this added value metric,” Hyman said.



Future Growth: Hyman noted that retail consultancy Planet Retail has forecast sales growth of $6 trillion during 2011 to 2014, with the majority -- 66.2% -- of the growth coming from developing/emerging markets.



“The growth in developed markets has peaked,” Hyman explained. “There are too many retail mouths to feed, and too much capacity in most developed markets, which has led to a lower returns from floor space. The global prize is in developing markets.”



Hyman said that solid and effective local partnerships are key to doing well globally.



“Local knowledge and local credentials are increasing important,” he added.