Survey ranks fastest emerging global retail markets
Retailers looking for global opportunities in emerging markets should head to Asia, particularly China, according to a just-released survey.
China ranks as the top country in A.T. Kearney’s 2016 Global Retail Development Index (GRDI), followed by India, whose high market potential, fast growth, improved regulatory environment, and ease of doing business pulled it up to second in the rankings. (See end of article for top 30 rankings.)
Now in its 15th year, the GRDI ranks the top 30 developing countries for retail investment worldwide according to 25 different macroeconomic, retail-oriented criteria such as GDP growth, income per capita and market saturation, measuring countries with populations of at least 5 million, and urban populations of 1 million or more.
“Despite China’s slowing economic growth, the GRDI’s top-ranked country remains one of the most attractive global retail markets,” said Hana Ben-Shabat, A.T. Kearney partner and co-author of the study. “The economy is gradually shifting from an investment-driven model to one driven by consumer consumption. The growing middle class coupled with strong demand from inland and lower-tier cities and the loosening of the one-child policy will continue to drive growth over the next 10 years.”
Overall, Asia is the regional winner in 2016, with four of the top five countries in the Index — China (#1), India (#2), Malaysia (#3), and Indonesia (#5) due to a combination of large populations and high growth. And E-commerce continues to grow in Asia, rising 35.7% in 2015 to reach $878 billion. Asia is now not only the largest e-commerce market, but it also holds a majority share of global online sales (52.5%).
With regards to India, Mike Moriarty, A.T. Kearney partner and study co-author noted that “India is now the world’s fastest-growing major economy, overtaking China, and retail demand is being fueled by urbanization, an expanding middle class, and more women entering the workforce.”
Here’s a look at how other markets fared:
Central Asia and Eastern Europe
Economic growth flattened and currencies devalued in this region, creating struggles for mass-market retailers and leading grocery retailers to focus on smaller formats. Turkey (#6) rises into the top 10 of the GRDI thanks to solid growth and a young and urban population, but rising unemployment, limited disposable income, and recent security challenges are threatening its broader retail development.
Despite the plunge in oil prices, Azerbaijan (#10) has remained a luxury hot spot behind its fast-growing tourism sector. In Russia (#22), the turmoil continues, but a weak ruble has boosted some sectors, particularly luxury.
Middle East and North Africa
The MENA region retail market has generally fared well in this year’s index, with two of the large Gulf economies ranked among the top 10 most attractive retail markets in the world, and Egypt (#30) opening up as an opportunity for retail investments.
Despite challenges in the United Arab Emirates (#7), where tourism has slowed and the market is reaching maturity, and Saudi Arabia (#8), which is reeling from depressed oil prices, absolute retail sales still grew over the past year.
Latin America
Although Latin America has fewer countries at the top of the ranking this year, the region remains a vibrant and exciting retail investment opportunity. Mexico and Chile have graduated from the GRDI due to market saturation. Peru (#9) moves into the top 10 behind free trade stimulus and steady growth, as retailers expand to emerging neighborhoods and secondary cities.
Brazil’s (#20) position continues to drop as the recently booming market suffers the impact of increasingly eroding political and economic conditions.
Sub-Saharan Africa
The region’s massive potential is reflected in the six Sub-Saharan African countries ranked in this year’s GRDI. Opportunities for retailers continue to open up as household incomes rise, countries become urbanized, and the rising middle class embraces organized retail and demands more and better services. However, informal trade still dominates and expanding into the region remains far from easy.
Retailers experience different levels of success in different markets. Nigeria (#19) has a population of 180 million people, but with a challenging business environment and a deeply rooted informal trade market it remains a high risk, high reward bet. South Africa (#27) is big and highly urbanized, but it also has strong local players and a saturated market.
Click here to read the full report.