Oct. 11 – China and India both fell out of the top three markets for retail development this year in the global management consulting firm A.T. Kearney’s 2011 Global Retail Development Index (GRDI). The annual study outlines investment opportunities for global retailers in emerging markets by ranking the top 30 countries for retail development based on four equally-weighted criteria: country and business risk; market attractiveness; market saturation; and time pressure.
China and India occupied respective rankings of first and third in last year’s report, but both countries saw a dip in their rankings in this year’s edition. Specifically, China dropped five spots to sixth overall while India slipped by only one spot to rank fourth overall on the list. Brazil (first), Uruguay (second), and Chile (third) all jumped by several positions over last year’s rankings to occupy the study’s top three spots.
The rankings revealed dramatic global changes. For the past 10 years, China, India, Russia, Vietnam and Chile have always been among the most attractive markets for retailers, but this year saw South America emerge as a developing retail force with Brazil, Uruguay, Chile and Peru appearing in the top 10.
Asia is still leading the global recovery, even though both India and China fell this year. The Southeast Asian economies remain promising as well, the study stated. In comparison to other retail products, groceries appear to be the region’s most important sector, making up two-thirds of total retail sales.
In 2010, China’s GDP grew by 10.3 percent and this year the figure is expected to be between 9 and 10. China’s retail market is worth US$ 2.1 trillion, which is about half the U.S. market. Though the country has been under increasing inflation pressure, its consumers remain positive.
According to the rankings table, the main reason for China’s slipping off on the GRDI rankings is the high saturation of the retail market. China developed rapidly following the reform and opening up policy, and so did its retail market. Foreign retailers had opportunities to enter retail markets not only in first-tier cities like Beijing and Shanghai, but also in second and third-tier cities and even in rural areas, which resulted in high saturation and fierce competition in China’s retail market. The country’s aging population is also considered to be one reason causing the low investment in the market as well.
At the same time, A.T. Kearney suggested China slow down and focus more on consumer needs, as “success will not happen overnight.”
A.T. Kearney also pointed out that the time to enter the Indian market is now, for the country’s retail market seems secure with strong growth fundamentals such as 9 percent real GDP growth in 2010 and forecasted annual growth of 8.7 percent through 2016. Furthermore, India’s retail market is more mature than the Chinese market, according to the study.
With expanding urbanization and a huge population, it is an attractive target in Emerging Asia. Additionally, the country has been boosting its organized retail sales, which account for 7 percent of total retail sales, a figure that is expected to amount to 20 percent by 2020.
The GRDI further said that four companies have emerged as “masters of globalization,” namely Carrefour, Metro Group, Tesco, and Wal-Mart.
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