Germany, UK, Canada are easiest countries for retailers to set up in
Retailers looking to expand into growth markets such as Brazil, India or China are facing tough set up conditions, with poor infrastructure, complex legal frameworks and a lack of access to prime premises being just some of the issues that are making it difficult to enter those countries successfully.
The first annual Retail International Programme Expansion (RIPE) Index, published by global built asset consultancy EC Harris, found that Western markets such as Germany, the United Kingdom and Canada are the easiest for retailers to expand into. This is down to factors such as an open business environment, mature property capability and the availability of prime shopping locations.
Colin Turner, Head of Retail at EC Harris said: “International expansion is the new battleground for retailers experiencing low growth in their domestic markets. Consumer appetite for Western brands in Asia makes these markets attractive, but not always easy to enter. Successful international expansion is about balancing the desirable with the doable. Much like a marriage, success is down to making a careful and committed choice, maintaining realistic expectations, and making plenty of adaptations along the way.”
The index ranks 40 international retail markets according to the five key factors that have a major impact on retail expansion success including quality of infrastructure, quality and quantity of the construction supply chain, property capability, legal framework and business environment. The best and worst countries were:
8. Saudi Arabia
The BRIC countries all present significant growth opportunities in terms of consumer demographics, however the RIPE report found that, when considering the ease of expansion into these countries, China is the leader, ranking 20th compared to 28th, 33rd and 40th respectively for Brazil, India and Russia. Interestingly, were it not for the low rating in the business environment category, China would compare favourably with mature Western and US markets, particularly in tier 1-4 cities.
Russia’s low rating on all categories in the study correlates with Wal-Mart’s decision not to enter this market after three years of intensive research. However, other multinational brands such as Kingfisher, Metro and Mothercare have expanded into Russia, albeit with a lot of specialist support on the ground.
Western markets – opportunity and threat
Whilst growth remains weak in the West, 70% of global consumer spending is still forecast to be concentrated in these markets over the next decade, making these countries critical to a retailer’s growth strategy. Domestic markets usually remain the single biggest contributor to profits, but several of the biggest retailers have been developing a multi-national business for many years including Tesco, IKEA Inditex and Carrefour, and many more are now following suit.
Colin Turner continued: “With Western countries easier to enter, mature local retailers need to protect their market share against foreign competition through keeping their retail offer fresh, for example through refreshing their store environments. The new Marks and Spencer concept store is one good example of this.”
Middle East – quick wins can be made
For retailers looking to make early international moves, particularly at the luxury end, the RIPE index shows that Saudi Arabia, Qatar and UAE present good opportunities, ranked 8th, 11th and 15th respectively. Luxury brands such as Bloomingdales are succeeding in the Middle East with high quality retail space on offer and an overall willingness to do business in the region. Future development in the lead up to the Qatar 2022 World Cup will see several major malls come to market, presenting further opportunities for retailers.
The highest scoring country in Latin America was Chile, at 13th place overall. With a favourable retail market and expansion conditions, Chile is likely to feature on many international retailers’ target lists. Wal-Mart has already taken a leadership position in Chile, acquiring 58% of domestic retailer D&S in 2009.
Via : Property Magazine