Magazines Archives - 2009 July

India makes comeback as the world’s most attractive market for retailers
Story 8 - News

INDIA has regained the crown as the world’s most attractive market for retailers. Based on the 2009 Global Retail Development Index (GRDI) by research firm AT Kearney, the country held the position for three years before losing out to Vietnam last year. On the other hand, the latter fell five notches to rank sixth in the current index.

The 2009 GRDI noted that India has hit its lowest inflation in more than a decade and continues to attract foreign retailers.

The index ranks 30 emerging countries on a 100-point scale according to country risk, population size and wealth. Scores are based on four variables — country risk, market attractiveness, market saturation and time pressure, measured by the compounded annual growth rate of modern retail sales and weighted by newly-created modern retail-sales area.

Now in its eighth year, the annual GRDI identifies windows of opportunity for investment in organised retailing in the developing markets that the index covers.

“Despite the global slowdown, India remains one of the fastest-growing countries in the Asian region, reflected by its 67% GDP growth between 2003 and 2007.

“With its lowest inflation in more than a decade, [the country] is well positioned to continue its growth,” AT Kearney stated.

Although sales growth is shrinking in the organised retail segment, with home-grown retail giants like Reliance Retail and Future Group slowing down their expansion plans, macroeconomic indicators appear to favour the growth of modern grocery retailing in the subcontinent, it noted.

“India’s educated, aspirational middle class, which is growing ever larger, is demanding a better retail environment and more global brands and styles. Global retailers (and several excellent, adaptive domestic retailers) can draw these shoppers away from traditional channels, such as wet markets, into organised global retail,” the GRDI reported.

A correction in real-estate values is also lending support to the market, with rentals in first-tier cities falling by as much as 20%, and up to 40% in secondand third-tier cities, the study stated

Global retailers are continuing to enter India as well, it noted, citing recent announcements of such bids by Wal-Mart, Carrefour and Tesco. Also bolstering India’s attractiveness is its rural population, making up 40% of the country’s US$280-billion retail market. Rural India, the GRDI noted, is becoming richer, making it attractive for retailers.

Meanwhile, it blamed Vietnam’s fall on the adverse impact of the economic crisis on the country’s economic output, with gross domestic product growing by only 3.1% in the first quarter of 2009, down from a 7.4% expansion in the same period last year.

With Vietnam’s real-estate boom and bust discouraging foreign investment, “the fight against inflation has turned into a fight against deflation”, the GRDI noted.

However, despite the short-term challenges, the long-term forecast remains rosy, as the market continues to open up to the world, allowing full ownership of local retail enterprises, it added.

“The country now has about 400 supermarkets and 2,000 convenience stores operated by both domestic and global companies. Many global retailers are well established in Vietnam, including South Korea’s Lotte, Japan’s Seiyu, Malaysia’s Parkson, France’s Big C, Hong Kong’s Dairy Farm, Thailand’s CP All and Germany’s Metro,” the index reported.

Vietnam, it added, continues to be buoyed by its young population and rapid pace of urbanisation.

Other markets considered attractive by the GRDI are Russia and China — both rose a notch to rank second and third, respectively — along with the UAE, which catapulted 16 places to rank fourth, and Saudia Arabia, which rose two rungs to fifth placing.

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