NEW YORK: Malaysia lost five places in the 2008 list of A.T. Kearney ratings of the most attractive emerging market retail destinations.
Ranked number eight in 2007, Malaysia fell to number 13 in 2008, according to A.T. Kearney’s seventh annual Global Retail Development Index (GRDI) which ranks 30 emerging countries which are ranked according to their attractiveness for retailers to enter a particular country.
The Kearney ratings are based on 25 variables across four main categories -- economic and political risk, market attractiveness, market saturation, and time pressure (the difference or addition between the gross domestic product or GDP and modern retail area growth).
A.T. Kearney, a global strategic management consulting firm, produced a surprise in its 2008 GRDI with Vietnam rated as the most attractive emerging market retail destination, ending India’s three-year title.
Vietnam’s leap from fourth position in the 2007 GRDI to first position in 2008 is attributed to strong GDP growth, changes to the country’s regulatory structure favouring foreign investors, and increasing consumer demand for modern retail concepts.
India, Russia and China, the top three countries in last year’s GRDI, fell to second, third and fourth position respectively in the 2008 GRDI. While these countries remain important retail investment destinations, high real estate costs in large cities and growing competition have decreased their attractiveness relative to prior years and forced retailers to look for opportunities in tier two and three cities.
Published since 2001, the GRDI helps retailers prioritise their global development strategies by ranking the retail expansion attractiveness of emerging countries based on a set of 25 variables.
The GRDI focuses on opportunities for mass merchant and food retailers, which are typically the bellwether for modern retailing concepts in a country.
"Despite slowing economies in developed countries, the retail opportunity in emerging economies is more compelling than ever as less than 10 percent of the retail market in these countries is organised," said Hana Ben-Shabat, a partner with A.T. Kearney and co-leader of the study.
"These markets will provide the engines for continued growth and profits for global retailers as sales in their home countries turn sluggish," he said.
While Vietnam’s US$20 billion retail market pales in comparison to India or China, the absence of competition and eight percent GDP growth make it an attractive expansion opportunity for global retailers, according to A.T. Kearney.
Vietnamese consumers, who are among the youngest in Asia with 79 million below the age of 65, have increased their consumer spending by more than 75 percent between 2000 and 2007.
"The country is growing increasingly urbanised and concentrated with more than one million people a year migrating into the two large cities Ho Chi Minh and Hanoi," Ben-Shabat said.
Malaysian investors in the retail trade might be interested to know that the government of Vietnam, an increasingly attractive investment destination among the Asean member countries, is expected to remove controls on 100 percent foreign ownership of retailers in the country, and has established a new programme to develop wholesale and retail real estate by 2010.
According to A.T. Kearney, the region has already seen the recent emergence of modern retail in countries such as Thailand, the Philippines and Malaysia.
"The Vietnamese consumer is seeing rapidly growing per capita income and regulations are drastically opening up the market for new entry," said Mike Moriarty, a partner with A.T. Kearney and co-leader of the GRDI.
"Now is the perfect time to get involved. It won’t be easy and you’ll be a pioneer. But now is the moment. Currently, the top five organised retailers in the country, including Saigon Co-op, G7 and Casino, have less than three percent of the market," he said.
"India continues to be one of the most attractive countries for global retailers today. The retail market opportunity is larger than ever at US$510 billion, and spending patterns and consumer maturity are growing faster than most global retailers had forecast," A.T. Kearney said.
"But challenges have emerged which could potentially slow the pace of growth for global entrants. Foreign players entering India today face stifling regulations, a clouded political atmosphere, soaring real estate costs and a fiercely competitive domestic retailer group," it maintained.
In China, the countryside has turned into the next retail battleground, despite China’s drop to number four in this year’s GRDI, according to A.T. Kearney.
China remains one of the fastest-growing economies in the world. Although its per capital GDP remains low, given the country’s large population, consumer spending has more than doubled from the mid-1990s and continues to grow rapidly in the large southern and eastern cities.
Manik Mehta
BERNAMA
15/06/08
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