Accenture Globalization Index

1st November 2012

Introduction

Message from Chris Donnelly Accenture Retail Industry Managing Director
I am delighted to announce the Accenture Globalization Index. Retail is one of the least global industries with most companies focused on their domestic market. Many retailers, however, are now making concerted efforts to globalize, driven by weak growth in saturated home markets and attracted to the higher growth rates of the developing markets. As every previous wave of internationalization has shown there are pitfalls to overcome and not every effort has been successful. This index is designed to identify which countries are attracting which formats, which methods of entry retailers are employing and how this is changing over time. I am grateful to our colleagues at Planet Retail for joining us in this effort.
Copyright © 2012 Accenture All rights reserved.

Message from Lindsay Cowan Chief Knowledge Officer at PlanetRetail
Planet Retail is delighted to support Accenture in the launch of its Globalization Index. In a challenging economic climate and with more sophisticated and demanding shoppers, globalization is fast becoming a vital component of any retailer’s long term success strategy. I am therefore very pleased that PlanetRetail is able to offer their global retail intelligence to facilitate the Accenture analysis of market entries and the impact on global view of retail strategy. Over the coming quarters I am looking forward to reviewing how and where the changing face of global retail develops.

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The Accenture Globalization Index
What does the Index measure?

Accenture and PlanetRetail have identified a universe of almost 500* of the largest grocery and non grocery retailers globally and has tracked their entries in new territories.

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Period of Analysis: 15 July – 15 October 2012
  There were 43 market entries. Results of this period will be used as the base (100) for future indices, which will be publish on a quarterly basis.

Each market entry is tracked in terms of:
Source Country Target Country Entry Format Entry Vehicle

Company’s home nation
Note: * see methodology for more details
Copyright © 2012 Accenture All rights reserved.

Countries they entered

Format or channel with which they entered

Entry vehicle they used

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The Top Target Markets
Key Findings
BRICs
Emerging Asian countries are the most popular markets, not the BRIC nations Western Europe North America Central & Eastern Europe South America Africa Developed Asia Middle East
1 2 2 3 5 8 9

Number of Market Entries by Region
Emerging Asia
13

Indonesia/Malaysia
Two stand out countries, with three and four market entries respectively.

USA
The single most popular target market

Source: Accenture Globalization Index Copyright © 2012 Accenture All rights reserved. 4

BRICs are yesterday’s news
If our three month snap shot is representative, and we shall see as the Index develops, then retailer internationalization has already moved on from the BRICs. Timing of market entry is critical: Too early and the market is not yet ready; too late and the competition is already entrenched and much of it could be very unfamiliar to the new entrant.

Number of Market Entries by Country (Emerging Asia)
Malaysia Indonesia
2 2 1 1 3 4

Retailers are focusing their international moves on Thailand Malaysia and Indonesia. The four retailers entering Malaysia are all from the West and are all specialist non-food retailers. Two of the three retailers entering Kazakhstan Indonesia are from Developed Asia and are a mix of food and non-food retailers. Pakistan The BRICs recorded one entry each, save India which recorded none. The early pioneers of entering China the BRIC countries have highlighted the challenges, making the next wave of potential new entrants take India 0 a longer, harder look at whether the risks outweigh the rewards.
Source: Accenture Globalization Index Copyright © 2012 Accenture All rights reserved.

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Indonesia - burgeoning middle class and youthful population

Indonesia has the third-largest population in Asia & Oceania at almost 240 million. By 2050, Indonesia’s population is expected to reach 319 million. Moreover, the population is youthful, with less than one in ten aged 65 years or over. Median age is 27.

Indonesia

50% of the population is urban. The growing numbers of urban young are becoming increasing fashion-conscious and gradually more Westernized. Since the Asian economic crisis in 1997/98, Indonesia's real GDP has grown at a CAGR of at least 5%. GDP per capita is US$ 3,700. Consumer spending per capita in local currency has almost doubled every five years since the 2000s, and the urbanites have significantly more spending power than rural dwellers. The three largest retailers are indigenous with sales between US$ 23 billion, but the next three are all foreign entrants and each have achieved sales of US$ 1-2 billion.

Source: Accenture Globalization Index Copyright © 2012 Accenture All rights reserved. 6

Malaysia - burgeoning middle class and youthful population

Malaysia

Malaysia’s total population is approaching 30 million. West Malaysia makes up 40% of the land mass but it accounts for 80% of the population and is much more developed. Two thirds of the population is urban. Malaysia has one of the youngest populations in the world with approximately one third of the population below 15 years of age. Real GDP grew strongly in 2010 after a decline in 2009 and the momentum was maintained in 2011. GDP per capita is US$ 9,700 and Malaysia’s middle class has doubled over the past decade. Consumer spending grew over 10% in 2011. The three largest retailers are all foreign players, however, none has achieved more than US$ 2 billion in sales.

Source: Accenture Globalization Index Copyright © 2012 Accenture All rights reserved. 7

Fashion retailers are flag planting; grocers are consolidating
Key Findings
Fashion
Fashion retailers are seeking opportunities in all parts of the world; our 15 market entries spanned 12 different countries.

Number of Market Entries by Sector
Fashion & Accessories Grocery Specialty Non-food Department Store
5 1 10 12 15

Grocery
Global grocery players are consolidating in existing markets but smaller grocers are seeking growth in new markets

Warehouse Club

Source: Accenture Globalization Index Copyright © 2012 Accenture All rights reserved. 8

Fashion retailers clothe the world
Fashion retailers are extending their brand reach with 15 market entries, 13 with stores and two ecommerce entries, spanning 12 different countries. Eight of the market entries were in emerging markets, the remaining four in mature markets. Early entrance in emerging market is a combination of brand building and seeking the best locations, but even in the most mature markets the fashion sector remains highly fragmented and a retailer with a distinctive offer can do well. The big three fashion retailers (H&M, Inditex and GAP ) lead in the number of the market entries as they try to become the dominant global fashion retailer. Inditex’s ecommerce entry was in China – building out a seamless offering as consumers become more confident buying apparel on online and realising that it the fastest and cheaper way to provide national coverage is online rather than stores.
Source: Accenture Globalization Index Copyright © 2012 Accenture All rights reserved. 9

Number of Market Entries by Fashion Retailer
GAP H&M Limited Brands Abercrombie & Fitch
1 1 1 1 1 1 1 2 3 3

Arcadia
Fast Retailing (Ecommerce) Inditex (Stores) Inditex (Ecommerce) New Look Sonae

Grocers – different strategies for different starting points
The three ecommerce market entries come from three of the largest global grocers and took place in emerging markets. They are more focused on building a seamless multichannel customer experience and operating model in existing markets than planting new flags in new markets . And it reflects their believe that these markets are ready for a grocery ecommerce operation. Two of the three convenience stores entries were into developed markets – Germany and the US – recognizing that this is the fastest growing part of the grocery market in these counties. Four of the remaining market entries were by relatively small grocers seeking growth within their geographic region; the Chilean Cencosud entering Peru and South Africa’s Shoprite entering the Democratic Republic of Congo. This can also be seen as building scale to compete with the global giants and entering these markets to establish themselves before the global giants move in.
Source: Accenture Globalization Index Copyright © 2012 Accenture All rights reserved. 10

Number of Market Entries by Grocery Format
Convenience Store
3

Ecommerce

3

Supermarket

3

Hypermarket /

2

Frozen Foods

1

Grocery – providing a seamless customer experience across multiple channels in core markets

Carrefour made three market entries in the last three months, one of which was to launch an ecommerce operation in an existing market – Indonesia. The market entries were balance with withdrawals from three non-core markets to focus on the markets where it is or can be one of the top three players and on its turn around in its home market. Tesco has also refocused on its existing markets, with emphasis on rolling out its grocery and non-food ecommerce operations to its foreign operations and doubling the number of UK stores offering "click & collect" to 1,600 by the end of 2012. Wal-Mart is aiming for cautious expansion of store networks in its existing markets, particularly Brazil and China. No new counties were entered in the period but Walmart did launch its Vudu movie streaming service in Mexico reinforcing its increasing focus on ecommerce, both at home and abroad.

Source: Accenture Globalization Index Copyright © 2012 Accenture All rights reserved. 11

The Top 5: Number of market entries – Who, what, from where, to where and how
By Retailer
Netflix GAP Inditex H&M Carrefour
3 3 3 3 4

Sector
Fashion & Accessories Grocery Specialty Non-food
10 12 15

Department Store
Warehouse Club
1

5

Source countries
US UK
7 14

Target countries
US Malaysia Indonesia
3 2 2 2 2 4 5

Entry Vehicles
Organic Website
13 17

France
Japan Spain
3

6

Kazakstan
Mexico Thailand

Franchise
JV M&A
0 5

8

3

UK

Source: Accenture Globalization Index Copyright © 2012 Accenture All rights reserved. 12

Methodology
Retailer Universe:

Top Retailers by Grocery Sales: Retailers that achieved grocery banner sales in excess of US$ 1.5 billion in 2011. Currently 250 retailers. Top Retailers by Non-Food Sales (not already included in the grocer list): Retailers that achieved non-food banner sales in excess of US$ 750 million in 2011. Currently 239 retailers.

Globalization move definitions:

The opening of a new format in a new country (irrespective of whether a company has a different format already trading in that particular country) The opening of a new country specific website (even if the retailer has existing operations in that country) The acquisition of a company in a target market The creation of a Joint Venture in a target country The launch of a franchise operation in a target country

  

Copyright © 2012 Accenture All rights reserved.

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Contact Details
About Accenture Accenture is a global management consulting, technology services and outsourcing company, with 257,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$ 27.9 billion for the fiscal year ended August 31, 2012. Its home page is www.accenture.com

To learn more about globalization contact: Chris Donnelly Senior Executive London, UK christopher.donnelly@accenture.com Takaaki Haraguchi Senior Executive Tokyo, Japan takaaki.haraguchi@accenture.com
Copyright © 2012 Accenture All rights reserved.

David T. Richards Senior Executive Chicago, USA david.t.richards@accenture.com Adrian Bertschinger Senior Executive Johannesburg, S. Africa adrian.bertschinger@accenture.com
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