Magazines Archives - 2008 July

Vietnam dislodges India as world's most attractive market for modern retailing
Story 5 - News

VIETNAM has ousted India, a threetime  leader, as the world’s most attractive market for modern retailing in ATKearney’s Global Retail Development Index (GRDI) this year.

The 2008 GRDI, released recently, shows Vietnam rising three notches from fourth position previously to take the top spot, leaving India trailing at number two. As a result, Russia, which was last year’s runner-up, and China, which ranked third, were pushed down by a notch to third and fourth placings, respectively.

What Vietnam has going for it is “the perfect mix of opportunity and timing”, ATKearney said in its report.

Observing that the progress of organised retailing in the Philippines, Thailand and Malaysia has helped introduce Vietnamese consumers to modern retailing, ATKearney also believes “the
opening up of the Vietnamese economy has encouraged global retailers to capitalise on the opportunity”.

“With its recently-deregulated retail markets, a stable political base and robust economy, Vietnam will lead the other Asian mini-tigers this year with a GDP [gross domestic product] growth rate exceeding 8%,” the GRDI projected.

It recognises that although the country “is one of the few remaining singleparty communist countries in the region, its leaders are attempting to replicate China’s economic success”.

Vietnam, which is undertaking a massive privatisation programme, is set to remove restrictions on full foreign ownership of retailers. Having 79 million people under the age of 65, rising living standards and a rapid pace of urbanisation also work to the market’s advantage, ATKearney noted.

How the country will fare going forward, however, remains to be seen as rising food prices have propelled its inflation rate to 25% in May this year, although Finance Minister Vu Van Ninh
sees this slowing down to a single-digit figure next year.

The ATKearney index also sees India continuing to be an attractive market, with its retail sector “larger than ever” at US$511 billion in 2008. “Organised retail, which still accounts
for less than 5% of the market, is expected to grow at a compound annual growth rate (CAGR) of 40% from US$20 billion in 2007 to US$107 billion by 2013,” ATKearney stressed.

“As a democratic country with high growth rates, India’s retail market opportunity is unchallenged. Consumer spending has risen sharply as the youth population (more than 33% of the country
is below the age of 15) has seen a significant increase in its disposable income,” it added.

But it also conceded some barriers on India’s retail scene “that could potentially slow the pace of growth for new global entrants”. These include stifling regulations that prohibit multi-brand
retailers from owning majority stakes in joint ventures, soaring real-estate costs and fiercely competitive domestic retail groups.

“In addition, shopping mall projects are running into resource constraints that are delaying completions and disrupting many retailers’ entry strategies,” ATKearney added.

Meanwhile, opportunities in China can be found in the countryside, the index revealed.

“The Chinese market remains highly-fragmented. Retail chains are growing in the larger cities but small, independent sub-scale retailers cover the countryside. Less than 5% of the grocery market is serviced by the top five organised grocery retailers,” ATKearney said.

Now in its seventh year, the GRDI ranks the top 30 emerging countries for retail development, analysing 25 macroeconomic and retail-specific variables. Other Asian countries that made the
top 30 list this year were Malaysia (13th), Indonesia (15th), Thailand (24th) and the Philippines (26th).

This year, the GRDI also unveiled the Retail Apparel Index, which looked into market opportunities in the apparel sector, and ranked the top 10 countries, based on market size, growth prospects and consumer affluence.

Brazil topped the charts as being the most “fashion forward” yet “highly fragmented” domestic retail market for apparel, followed by China and then India.

“[While] this year is shaping up to be a turbulent one for global retailers — 2008 will be a landmark year for visionary retailers that differentiate their companies from the competition by expanding
into new emerging markets,” the report concluded, with a gripping door-die message for retailers.

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