A.T. Kearney’s Global Consumer Institute released its 2012 Global Retail Development Index (GRDI), a ranking of the top 30 developing countries for global retail expansion. Brazil is #1 for the second year in a row, driven by a growing middle class economy, high consumption rates, a large urban population, and reduced political and financial risk. In addition, Brazil’s relatively young population and high per capita spending in the apparel and luxury sectors make this country a top destination for specialty retailers.
Botswana ranked 20th in this year’s GRDI. Botswana’s entry into the GRDI ranking is a precursor to steadily developing countries in the sub-Sahara Africa region that could emerge as favorable retail markets in coming years.
Although the Arab Spring uprisings had a negative impact on the rankings of several MENA countries including Lebanon (-10 versus 2011), Morocco (-7 versus 2011) and Tunisia (-12 versus 2011), several countries from the region are still high on the ranking – U.A.E. (#7), Oman (#8), Kuwait (#12) and Saudi Arabia (#14).
While the world’s largest developing markets—particularly the BRIC nations of Brazil, Russia, India, and China—still tempt the largest global retailers and show no signs of slowing down as a source of growth, many smaller, untapped markets are providing new growth opportunities. New countries in the 2012 index include several “small gems” such as Georgia (#6), Oman (#8), Mongolia (#9) and Azerbaijan (#17) that are showing progress as attractive destinations for global retailers, particularly specialty and luxury players. These markets, though small in total retail market size, have strong fundamentals that appeal to retailers targeting a concentration of wealth and seeking to be first movers in fast-growing markets.
Michael Moriarty, an A.T. Kearney partner and the study's co-leader, commented, “Given the accelerated growth rates of developing countries compared to the anemic growth in European and North American markets, global retailers must have a strategy for expansion into developing markets. In the past five years, US-based Wal-Mart, France-based Carrefour, UK-based Tesco and Germany-based Metro Group saw their revenues in developing countries grow 2.5 times faster than in their home markets.”
Latin America’s expanding, dynamic retail sector and strong economic growth has driven strong results with seven countries included in the GRDI this year. Many retailers have entered Latin America in the last few years.
Retail sales per capita in Brazil (#1 in the index) have grown 12% per year for the past four years to reach $5,514, the third largest of the countries ranked in the GRDI. The retail market size increased 15% last year, and consumer spending has increased by nine percent per year since 2007. In 2011, retail sales accounted for 70% of Brazil’s consumer spending.
Chile (#2 in the index) has one of the most sophisticated and competitive retail markets in the region. The country is one of Latin America’s fastest-growing economies, with expected GDP growth of 6.2% in 2012. Additionally, inflation is low and country risk is low.
China moved up in the 2012 GRDI, ranking #3. The country’s future retail growth remains positive, with double-digit annual sales growth expected. However, inflationary pressures are driving up rents 30% per year, and labor costs are growing 15% a year. China is one of the world’s largest luxury goods markets, with more than 100 brands active in the country.
Ranked #4 in the index, Uruguay is becoming a retail destination. Despite its relatively small local population, Uruguay’s high urbanization and strong consumption levels are attractive to retailers. The economy is progressing—annual GDP growth has been 6% since 2007 and unemployment is at an all-time low.
India, fifth on the index, remains a high-potential market with accelerated retail market growth of 15–20% expected over the next five years, supported by GDP growth of 6–7%, rising disposable income, and rapid urbanization. Changes in FDI regulations were a major story in India last year. The changing FDI climate has provided an interesting dynamic to several international retailers’ entry and expansion plans for India. Organized retail penetration remains low, at 5–6%, indicating room for growth.
2012 Global Retail Development Index ranking:
- Brazil (2011 rank: #1)
- Chile (2011 rank: #2)
- China (2011 rank: #6)
- Uruguay (2011 rank: #3)
- India (2011 rank: #4)
- Georgia (2011 rank: N/A)
- United Arab Emirates (2011 rank: #8)
- Oman (2011 rank: N/A)
- Mongolia (2011 rank: N/A)
- Peru (2011 rank: #7)
- Malaysia (2011 rank: #19)
- Kuwait (2011 rank: #5)
- Turkey (2011 rank: #9)
- Saudi Arabia (2011 rank: #10)
- Sri Lanka (2011 rank: #21)
- Indonesia (2011 rank: #15)
- Azerbaijan (2011 rank: N/A)
- Jordan (2011 rank: N/A)
- Kazakhstan (2011 rank: #14)
- Botswana (2011 rank: N/A)
- Macedonia (2011 rank: #29)
- Lebanon (2011 rank: #12)
- Colombia (2011 rank: #24)
- Panama (2011 rank: #26)
- Albania (2011 rank: #13)
- Russia (2011 rank: #11)
- Morocco (2011 rank: #20)
- Mexico (2011 rank: #22)
- Philippines (2011 rank: #16)
- Tunisia (2011 rank: #18)