India and China Are Tops for Retail Investment

Some retailers have rethought their global expansion strategy given Brexit and America First.

India is the top developing country for retail investment, according to the latest edition of A.T. Kearney’s Global Retail Development Index.

Helping India achieve the number-one ranking is the country’s strong gross domestic product growth, an expanding middle class and a favorable regulatory environment over the past few years, the report said. New entrants in the Indian market last year include Armani Exchange, Cole Haan, Muji and Kate Spade.

Ranking second is China. Although the Asian country has had slower overall economic growth, the size of the consumer market and continued retail evolution “still make China one of the most attractive markets for retail investment,” according to the report.

The index, now in its 16th edition, ranks the top 30 developing countries for retail investment worldwide. It also analyzes 25 macroeconomic and retail-specific variables to help retailers craft strategies in connection with emerging market investment opportunities.

One of the findings from the past year was that fewer retailers either entered new markets or expanded within existing ones. A.T. Kearney concluded that because of an uncertain changing geopolitical backdrop plus increasing nationalist sentiments via Brexit and America First and intensifying competition from local and regional retailers that have grown more sophisticated, many retailers have been forced to pause and rethink their strategies. For example, Marks & Spencer exited China, while Galeries Lafayette pulled out of Morocco.

Hana Ben-Shabat, a partner at the advisory firm and coauthor of the study, said, “Retailers are thinking twice about expansion into places where there is uncertainty about future government actions or high political risk.”

The study this time also included a section about mobile shopping and its impact on global retail expansion because in many developing markets, mobile retail is the primary form of online shopping. One retailer that has relied on mobile for its expansion is Aldi, which entered the Chinese market through the Tmall platform. Others taking a similar approach include Sainsbury’s, Target, Macy’s, House of Fraser, Saks Fifth Avenue and Topshop, the report noted.

By region, Asia is the leading driving force behind expansion for consumer brands, including personal-care products, apparel, fashion and luxury. It is also the top region, with five of the top 10 countries, including India and China. The other three are Malaysia in third place, Vietnam in sixth place and Indonesia, which placed eighth.

Eastern Europe and Central Asia only had one country in the top 10, Turkey, which placed fourth in the rankings. While it has had a turbulent year politically, the nation has a young and urban population, which helped Turkey garner the third-highest placement in retail sales among the countries ranked by the Index.

The Middle East and North Africa had two countries in the top 10: The United Arab Emirates, ranked fifth, and Morocco, ranked seventh. The UAE is an attractive market because of growth potential outside of Dubai, while Morocco rose seven positions due to the government’s efforts to attract foreign investments, the A.T. Kearney report found.

Two countries in the Latin American region, Peru and Columbia — ninth and tenth, respectively — rounded out the top 10. Brazil, the region’s giant, dropped to the 29th slot amid the country’s recession and political crisis.

Five countries in Sub-Saharan Africa made the Index’s top 30 ranking this year: Côte d’Ivoire, 17th place; Tanzania, 21st place; Kenya, 25th place; South Africa, 26th place, and Nigeria, 27th place.

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