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Emerging markets present an amazing growth opportunity for retailers

Emerging markets present an amazing growth opportunity for retailers, both established ones and smaller companies looking to expand their customer base. Territories such as Brazil, Russia, India and China (collectively known as BRIC) are the most well-known and sought-after of the emerging markets, but there are many other developing countries which present strong opportunities for retailers who are willing to act quickly and establish themselves before the markets become saturated.

The AT Kearney Global Retail Development Index is an annual report which ranks the top developing countries based on macroeconomic performance and the health of their retail industry in general. The 2013 report suggests that there are many opportunities for retailers in the BRIC territories, but also highlighted some other emerging markets, including Sub-Saharan Africa, whose growing population is contributing to a rapidly growing retail market.

Rapid Growth in Brazil

Brazil is currently the number one country in the GRDI, and it is considered to be a fairly low risk country for retailers to enter, too. Not only is Brazil an emerging market, it is one that is set to explode in popularity over the next few years. As the host of the World Cup in 2014, and the Olympics in 2016, Brazil is set to be both a tourist hotspot and a place of massive economic growth.

The recent development of the Village Mall offers a chance for retailers to launch their brands. To date, most retail activity has been taking place in Rio de Janeiro and Sao Paulo, but that is set to change soon as the government invests in modernising and revitalising other cities. Supermarkets and major retailers such as WalMart are developing a presence in Brazil, but there are opportunities for all kinds of retailers, from DIY shops to children's toy stores. The Brazilian economy has reached the stage where consumers have disposable income, and are looking for affordable places to spend it and improve their quality of life.

Recovery in Russia

Russia is ranked number 23 in the GRDI report for 2013, which may make it seem like a less than attractive option, however it has climbed three spots since last year, and looks set to become an even more important market soon. Russia is a large country with a small population, in a fairly precarious position because it depends on natural resources for much of its income. However, the Russian population includes many middle-class workers who are big spenders.

The Russian market is reaching maturity, and any company that wants to enter the marketplace should act quickly before their niche reaches saturation point. Big areas of opportunity for Russia include smartphones (telecoms operators have just started to invest in the country), and home entertainment systems. The Russian TV system will switch over to digital in 2015, and many families are investing in new TVs and related systems in anticipation of that change – a great opportunity for technology retailers.

The Chinese Luxury Market

China is ranked near the top of the GRDI, sitting in fourth place, a slight slip from 2013, when it enjoyed the third spot. The market is still an attractive one for retailers, but it is now incredibly time-sensitive. The Chinese economy is doing well, and the government is committed to maintaining economic growth, but it is time for that economy to move from a "push" market to a consumer driven one. Competition in the Chinese market is starting to become more intense. There are more than three thousand malls in Chinese cities, and major fashion retailers such as H&M, Zara and Gap have established a growing presence over there.

One major growth opportunity is the luxury market. Affluent Chinese consumers are looking for luxury goods, but major brands such as Gucci are present in only a handful of cities. A luxury retailer setting up a store in a tier 2 or tier 3 city could stand to do very well over the next few years.

Investment in India

India was ranked 14th in the GRDI for 2013, a fall of nine places compared to last year. The country faces some serious challenges over the next few years, which has made it less attractive to investors and retailers. One of the main problems with the Indian economy is that many of the major Indian states are opposed to Foreign Direct Investment. However, there is still a lot of potential in the economy. The Indian government is investing in developing new infrastructure, and the population is becoming richer and better educated, as well as more mobile. The retail sector is expected to grow by 14 to 15 percent per year until 2015, with the fashion sector in particular being a major source of growth.

High fashion stores and boutiques such as Armani Junior, Brook Brothers, and Christian Louboutin are all performing well in the Indian marketplace. It makes sense to try to take advantage of India's large, young and financially liquid population.

Other Emerging Markets

Retailers should pay attention to the whole of Latin America, not just Brazil. While Brazil holds the top-spot in the GRDI, Chile is not far behind, being the second most desirable general retail market, and one of the top three markets in terms of apparel. Both the luxury market and the general high-street market for apparel are enjoying rapid growth in Latin America.

Another interesting market is the Middle East. Growth in the Middle East is being bolstered by a renewed interest in tourism and a growing expat community; as such the luxury and mid-priced markets are the top performers in the UAE.

The Asian economy has stumbled of late, but there are still some attractive markets in the area. Both Mongolia and Malaysia are worth watching. Mongolia is a small market, but it is growing rapidly, and has recently attracted the attention of several big brands, including Louis Vuitton and Burberry. Mongolia's small population makes it a bad bet for specialist retailers, but department stores, supermarkets and apparel retailers are all taking an interest in the country.

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