Brazil Jumps to First Place in Ranking of Top Developing Economies for Global Retail Expansion

A.T. Kearney today released its 2011
Index of top ranked developing countries for global retail expansion.
 In the 10th annual Global Retail Development Index (GRDI), Brazil jumped to first place from #5 in last year’s study.  

The
2011 GRDI ranking mirrors the dramatic changes that have taken place in
global markets, and the varying impacts they have had on different
emerging economies.  South American countries have fared well during the
recession posting an impressive 6 percent GDP growth in 2010. In
addition to Brazil‘s top ranking, three other South American countries, Uruguay, Chile and Peru, made the Top 10 of the GRDI.

Michael Moriarty, A.T. Kearney partner and study co-leader said, “Brazil is an attractive target expansion market given expected GDP growth of 5
percent per year over the next five years, a large and highly urban
population, and surging retail sales.” He also noted, “In addition to
the substantial investment in infrastructure the Brazilian government is
planning, inflows of foreign capital are rising dramatically as well.”

Uruguay climbed up the rankings to #2 this year, from #8 in last year’s GRDI.
The country is riding Brazilian coattails, and experienced significant
GDP growth of 8.5 percent in 2010. The country’s limited scale combined
with positive macroeconomic conditions makes it an interesting choice
for retailers looking to expand into more contained markets.

Chile rose to #3 in the ranking after a strong recovery from the 2009 recession. It is now considered one of Latin America‘s most competitive markets. The government created incentives to stimulate retail consumption, and as a consequence Chile‘s GDP grew 5.2 percent in 2010 and is expected to grow another 6.1 percent in 2011.

Another region that ranked highly in the 2011 GRDI was the Middle East and North Africa. While the political unrest may affect immediate plans to enter countries such as Egypt and Tunisia,
the region’s extraordinarily young population (more than 60 percent
between the ages of 15 -39) could result in greater economic stability
and integration into the world economy in the long run. Kuwait, Saudi Arabia,
and the UAE (all top 10 GRDI markets in 2011) have not experienced the
turmoil of some of their neighbors and are expected to remain stable
going forward.

The 2011 Global Retail Development Index marks the
10th anniversary of this global study. The key learning from an
analysis of the last 10 years is that global retail expansion is a
portfolio game. Retailers must have an optimal mix of countries, formats
and operating models to succeed.

Hana Ben-Shabat, A.T. Kearney partner and co-leader of the study said, “In the last 10 years it has
become clear that there is no ‘one size fits all’ formula for global
expansion. Different countries are at different levels of development
and have different risk/return profiles, which require retailers to
tailor their approaches accordingly and assemble a portfolio of markets
to balance short-term risk with long-term growth aspirations.”

The
GRDI helps retailers prioritize their global development strategies by
ranking the retail expansion attractiveness of emerging countries based
on a set of 25 variables including economic and political risk, retail
market attractiveness, retail saturation levels, and the difference
between gross domestic product growth and retail growth.

GRDI 10-year Retrospective Provides Critical Retail Expansion Lessons

For
the 10 year anniversary of the GRDI, the team conducted a retrospective
that provides insight into how global retail has grown and changed over
the past decade by presenting a snapshot of: major shifts in the retail
landscape of emerging markets; key markets for retail attractiveness
over the last 10 years; global growth trajectory of the world’s leading
retailers; and lessons learned from international retail expansion.

Over the last 10 years regions have opened to global retail at different times. In the early 2000s the focus was on Eastern Europe as those markets gained membership in the European Union. China‘s
acceptance into the WTO in 2001 also marked the opening of that market
to trade and investment. These market expansions were followed by Southeast Asia, Latin America and the Middle East. Africa will soon be a focus region for global retailers.

The
last ten years of global retail expansion has shown that driving
consistent, profitable performance is a challenge. The study leaders
offer “Seven Lessons Learned” for retailers expanding into global
markets based on 10 years of GRDI analysis and client experience.

A.T. Kearney Global Retail Development Index, 2011