GLOBAL RETAIL

SCENARIO
Brief Understanding of the
2014
A.T. Kearney GRDI Report
GROUP 5

Anand Agarwal 02
Ankush Batra 06
Aniruddh Bhadra 07
Mayaleen Thakuria 38
Kshitij Jindal 42

Mahima Suhalka 48
2014 A.T. Kearney GRDI report Brief
understanding

Published since 2001, the GRDI ranks the top 30 developing countries for
retail investment worldwide. This Index analyses 25 macroeconomic and
retail-specific variables that help retailers devise successful global
strategies to identify emerging market investment opportunities.

The GRDI report ranks 30 developing countries on a 0-to-100-point scale

the higher the ranking, the more urgency there is to enter a country.
Countries are selected from 200 developing nations based on three
criteria:
Country risk: lower than 110 in the Euromoney country-risk score
Population size: two million or more
Wealth: GDP per capita of more than $3,000
These countries are then scored on the following 4 variables:

Country and Business Risk 25%

Market Attractiveness 25%
Market Saturation 25%
Time Pressure 25%

According to 2014 A.T. Kearney Global Retail Development Index (GRDI)

report, Chile ranked 1st followed by
Uruguay, Brazil, Peru, Panama, Colombia, Costa Rica and Mexico also in
the index of top emerging economies that are ready for retail
expansion, Latin America continues to show strength as a regional retail
growth market.
Nigeria, Botswana, and Namibia are also ranked in the index, Sub-Saharan
Africa is also expanding into another exciting regional retail opportunity,
too.

Global retailers have learned from past mistakes and have become much
more adept and successful with their emerging global market expansion

strategies. E-commerce is playing a supporting role by helping with global

expansion as retailers are able to test a market and build their brand
through e-commerce before they expand with brick and mortar stores."

By using their proximity as a competitive advantage to steal share in

neighbouring markets, regional retailers are becoming players in
emerging markets.
Chile's Falabella and Cencosud have begun growth plans aggressively to
widen their footprint across Latin America, and UAE-based LuLu
Hypermarkets and Majid Al Futtaim have begun expanding in the Gulf
region. South African retailers Shoprite and Woolworths have spearheaded
Sub-Saharan Africa's shift to modern retail with expansion to
Nigeria, Botswana, and Namibia.

The 2014 GRDI also includes a special report on the countries that have
moved out of the GRDI rankings over time. The list of exits from the GRDI
includes Poland and South Korea, which developed into modern retail
markets; Bulgaria andRomania, where stalled economic growth delayed
retail development; and Algeria and Ukraine, where social and political
unrest unravelled retail growth.

The figure shows various countries as they progress year on year from
opening to peak to maturity leading to decline phase in the GRDI priority.
Some countries like India, China and Russia have matured and are no
longer considered emerging markets, while others like Peru and Columbia
are at a peak, and some have stalled due to economic issues or political
risk.
Countries like Hungary, Poland and South Africa are shown exiting the list.
The report also gives an Idea of the mode of entry and the labour strategy
that was used by the countries as they progressed from one phase to
another.

GRDI Regional Results

The Full GRDI Report includes detailed commentary for all 30 countries
ranked in the Index. Following are some highlights:

Latin America
Latin America keeps its dominating position in the GRDI, with 3 countries
in the Index's top 5 positions, as an expanding middle class offers
lucrative opportunities. This diverse retail ecosystem includes Brazil's (#5)
huge market, Chile's (#1) sophisticated mid-sized market, and "small
gems" such as Uruguay (#3), where high consumption levels are
attractive to luxury brands. While other Latin American countries face
economic and political challenges, continued economic and political
stability in leading countries has led to increased consumer and investor
confidence and created a favourable environment for retail.
International retailers are entering and gaining ground in a highly
competitive environment with local and regional leaders. This battle is
most intense outside of the region's capital cities, where new markets are
emerging as consumers opt for modern retail formats.

Having previously analysed a greater part of the graph and with regards
to GRDI and the nations already On The Radar, it is important to
understand why certain nations are low on priority on the list. The nations
most notably in this area are Phillipines, Vietnam, Morocco, Azerbaijan,
Costa Rica and Mexico.
Quite clearly Mexicos net retail sales is comfortably more than a few
players on the radar as well as on the consideration list but the primary
reason its low on priority is possibly due to a recessed economic growth
due to reduced industrial activity and consumer spending thanks to new
tax regimes and increased fuel prices. Additionally Mexico is a country
with limited E-commerce transactions which further hamper the retail
sales and scenario.
Costa Rica, another Latin American country on the list is most likely a
victim of time pressure which sees it in a low priority list as it is believed it
has a well established democracy and rapid economic growth. Also with
increased per capita income the population is trading up and lower
income consumers now buying more, which paves the way for market
attractiveness and having fairly low net retail sales, it can be assumed
there arent many players in the market to saturate.
Philippines and Vietnam find themselves low in attractiveness list most
likely due to a low per capita income of the population and comparative
non affluence of the people. To add to it a political uncertainty within the
country and an economy largely driven only by tourism.
Morocco again plagued by a not-so-stable economy is seen as
unattractive. At the moment with only 13% of the labour force
representing retail and an extremely slow retail and trade growth. Grocery

and open air market places represents the bulk of retail quite certainly
keeping the net sales low.

Asia
Asia has a number of fast-growing economies that offer fertile ground for
retailers, as growing populations, rising incomes, and increasing affinity
for modern formats helps retail sales increase rapidly. Modern retail is
expanding beyond the largest urban centres to smaller, untapped cities
and regions.
The region saw several improvements in the rankings, led by China (#2),
which rebounded into second place, Malaysia (#9), which re-entered the
top 10 for the first time since 2009, and Indonesia (#15) which moved up
four places from last year's ranking. Other Asian countries in this year's
Index include Sri Lanka (#18), India (#20), Philippines (#23),
and Vietnam (#28).
Even with less-bullish economic growth, China remains impossible for
retailers to ignore. Retail sales in the world's most populous country
increased 13 percent in 2013 (to $3.7 trillion), and consumer confidence
rose.

Middle East and North Africa

The Middle East is a dynamic retail region with a growing and young
population, strong GDP growth, and increasing consumer confidence and
spending. With Qatar scheduled to host the FIFA World Cup in 2022
and Dubai recently winning the Expo 2020 bid, the region's construction
and infrastructure boom should continue, thereby benefiting retail.
Middle East and North Africa (MENA) consumers are becoming increasingly
more demanding, seeking formats to better meet their needs along with
more interesting creative concepts. Some markets are saturating,
particularly Dubai, and local developers are now expanding across the
region. Fewer international companies entered in 2013, but those in the
region focused on expanding their footprint and growing local brands. ECommerce in MENA is predicted to grow from $9 billion in 2012 to $15
billion by 2015, according to a PayPal study.

Central Asia and Eastern Europe

This region's highest-ranked countries are some of the GRDI's most
shining "small gems" countries such

as Armenia (#6), Georgia(#7), Kazakhstan (#10), and Azerbaijan (#30)

whose location and unsaturated retail environment makes them attractive
options for international retailers. On the other end of the spectrum
is Russia (#12), which leaped back up the rankings this year as its retail
potential outweighed the country's lingering risks.

Sub-Saharan Africa
Africa is marked by distinct regional differences. In the West, Africa's most
populous region, international retailers including Walmart and Carrefour,
have succeeded in navigating the challenging business landscape,
targeting middle- and high-income consumers who are brand conscious
and want convenience, quality and variety.
The East is untapped and increasingly attractive, as the largely informal
markets feature few international retailers. Regional retailers dominate
the region targeting all income segments.
In the South, the most developed region with stronger infrastructures,
high incomes, and macroeconomic stability, South African retailers lead
the growth with their close proximity and cultural alignment. Regional and
local retailers are leading the e-commerce push, particularly among
affluent consumers.