India offers best prospects for retailers

16 June 2009

MUMBAI: India is the "most attractive" country for global retailers looking to develop their operations in emerging markets, despite the fact the growth of the national "organised" retail sector slowed in the country last year, a report from A.T. Kearney, the consultancy, argues.

Based on an assessment of the "market attractiveness", "country risk", "market saturation" and "time pressure" of 30 developing markets around the world, the company gave India an average score of 68% across all of these measures.

This was despite the fact that 2008 was "not a good year" for the national "modern" retail sector, according to Hemant Kalbag, a partner at A.T. Kearney in Mumbai.

He argued that this had resulted from "more competition", and as "consumers are spending less … and traditional trade channels have been more resilient than any of us had planned."

More positively for retailers, rents have fallen, inflation is comparatively low, and spending levels have proved remarkably stable in the countryside.

Global chains like Wal-Mart, Tesco and Carrefour are thus "continuing expansion plans as Indian consumers grow increasingly affluent, brand-conscience and familiar with global retail formats," the company says.

Russia, on 60%, was ranked in second place, and while its GDP is expected to decline this year, retail sales are forecast to increase by 15% per annum over the next five years, with "food and non-food sales bouncing back in 2010."

China, in third position on 56%, was also said to be benefitting from the financial stimulus package put in place by its government, which is "showing early signs of success as retail sales have grown in early 2009."

Many of the country's second- and third-tier urban centres have also been "less affected by the economic crisis and are more suitable for new expansion than larger Chinese cities," a trend which has meant that most retailers are now opting to open smaller format stores in these areas.

The United Arab Emirates was in fourth, as its "oil-driven economy proved more resistant to widespread downturn than other countries" and it has "the highest per capita consumer spending" of all the markets assessed.

Saudi Arabia was in fifth, with Vietnam, last year's top-ranked market, falling five positions to sixth as a result of "inflationary pressures", consumer price inflation and a "significant drop in its export-driven economy."

Data sourced from Wall Street Journal/AT Kearney; additional content by WARC staff