Oman in top 10 in 2012 Global Retail Development Index (GRDI)
By staff - Mon Jun 11, 7:51 pm
A.T. Kearney’s Global Consumer Institute released its 2012 Global Retail Development Index (GRDI), which ranked the top 30 developing countries for global retail expansion, and again Brazil was No. 1 for the second consecutive year. Brazil’s economy was driven by a growing middle class, 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 patterns in the apparel and luxury sectors make this country a top destination for specialty retailers, according to the consulting firm.
Diamond-rich Botswana ranked 20th in the index. (Learn more as the Diamond Trading Company prepares its move to Botswana.) This country’s entry into the GRDI is a precursor to steadily developing countries in the sub-Sahara Africa region that could emerge as favorable retail markets in coming years, A.T. Kearny concluded. New countries on the index included Georgia (No. 6,) Oman (No. 8,) Mongolia (No. 9) and Azerbaijan (No. 17). These small countries are showing progress as attractive destinations for global retailers, particularly specialty and luxury players. These markets exhibit strong fundamentals that appeal to retailers targeting a concentration of wealth and seeking to be first movers in fast-growing markets.
Although the ”Arab Spring” uprisings had a negative impact on the rankings of several Middle East, North Africa countries including Lebanon (down 10 spots,) Morocco (down seven spots,) and Tunisia (down 12 places,) several countries from the region ranked favorably: U.A.E. (No. 7,) Oman (No. 8,) Kuwait (No. 12) and Saudi Arabia (No. 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 as a source of growth, many smaller, untapped markets are providing new growth opportunities.
Michael Moriarty, A.T. Kearney partner and the study’s co-leader, said, “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, U.S.-based Walmart, France-based Carrefour, U.K.-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 past few years.
Retail sales in Brazil, for example, have grown 12 percent per year for the past four years to reach $5,514 per capita, the third largest of the countries ranked in the GRDI. The retail market size increased 15 percent last year, and consumer spending has increased by 9 percent per year since 2007. In 2011, retail sales accounted for 70 percent of Brazil’s consumer spending.
Chile (No. 2) has one of the most sophisticated and competitive retail markets in the region, the group found. The country is one of Latin America’s fastest-growing economies, with expected GDP growth of 6.2 percent in 2012. Inflation is low and country risk is low.
China moved up in the 2012 GRDI to No.3. The country’s future retail growth remains positive, with double-digit annual sales growth expected. However, inflationary pressures are driving up rents 30 percent per year, and labor costs are growing 15 percent a year. China is one of the world’s largest luxury goods markets, with more than 100 brands active in the country.
Uruguay (No. 4) 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 with an annual GDP growth at 6 percent since 2007 and unemployment is at an all-time low.
India (No. 5) remains a high-potential market with accelerated retail market growth of 15 to 20 percent expected over the next five years, supported by GDP growth of 6 to 7 percent, 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, A.T. Kearny found. Organized retail penetration remains low, at 5 to 6 percent indicating room for growth.