A.T. Kearney: China is top emerging retail market
CHICAGO — Retailers looking for opportunities in emerging markets should look East, particularly to China, which ranks as the top country in A.T. Kearney’s annual Global Retail Development Index (GRDI). China, which returns to number one in the GRDI rankings for the first time since 2010, is expected to surpass the United States as the world's largest retail market by 2018.
Despite having the lowest GDP growth in more than 20 years, China’s performance was unparalleled relative to other developing markets. Its retail growth was an impressive 11.6% in 2014. China's retail market is expected to grow to $8 trillion — double the size of the U.S. market — by 2022, according to the report, which ranks 30 countries in emerging markets via two dozen “retail-specific” and “macroeconomic” metrics. (
"As a result of turbulence in the Middle East, Latin America, and Russia, the past year has seen a more cautious approach to international expansion into some developing markets,” said Mike Moriarty, A.T. Kearney partner and co-author of the GRDI.
“However, retailers are taking a longer-term view of emerging markets, with fewer exits, and more targeted investments in areas of growth."
Overall, Asia is a regional winner in the 2015 GRDI, outpacing other regions despite a slowdown in growth, according to the report. While China came out on top, small countries, including Mongolia (reemerging at 5th) and Malaysia (9th for the second year in a row), also cracked the top 10. India also rises in the rankings, benefiting from economic stability and regulatory reforms aimed at improving ease of doing business, although restrictions on multi-brand retail remain.
In addition, e-commerce continues to grow rapidly, with Asia's market size ($525 billion) now exceeding that of North America ($483 billion). As Internet penetration expands and online offerings improve, Asia's e-commerce retail sales could grow as much as 25 percent annually. The online channel will continue to be a major focus for retailers in the region in the coming years.
Here is a look at how other regions fared in the rankings:
• Latin America: Latin America as a whole once again has a prominent position in the GRDI, with three countries in the top 10. However, the region has begun trending downward in the rankings, and regional GDP growth sank to roughly 1.3% in 2014 amid concerns over deep-rooted structural problems since the end of the commodities boom.
• Middle East: In the past year, the Middle East has faced substantial economic and political upheaval, and the ranking drops in this year's GRDI reflect the varied environment: market saturation (the United Arab Emirates), increased country risk (Jordan), and GDP slowdown from falling oil prices (Kuwait).
Qatar makes an impressive GRDI debut, in 4th place, highest in the Middle East behind a stable economy, high GDP per capita, and high levels of retail spending. With population growth and an increasing number of expats, Qatar is no longer a market to ignore, the report advises.
• Sub-Saharan Africa: Sub-Saharan Africa is a region of massive potential. Three countries (Botswana, Nigeria, and Angola) are ranked in this year's GRDI, and three more (Zambia, Namibia, and Ghana) are on the verge of breaking into the top 30 in the near future. The region presents exciting opportunities that are just starting to open up, the report finds, supported by rising household incomes, fast urbanization, and a growing middle class.
• Central Asia and Eastern Europe: This region's top performers in the GRDI are its small gems — Georgia, Armenia, and Kazakhstan — whose unsaturated retail environments are attractive opportunities for international players. Azerbaijan has become a luxury hot spot as more companies seek to tap into the country's oil-driven wealth.
Russia, which has the world's sixth-largest GDP, plunges in the rankings behind worsening economic conditions and political tension, yet it remains too big to ignore, according to the study.
Click here to read the full 2015 GRDI report.