Retail in 2013: Shifting sands and new battlegrounds
Retailers face a year of consolidation as strategies shift to address an evolving consumer landscape, in terms of both geography and channels. By Jon Copestake, Economist Intelligence Unit.
2012 is a year many will be happy to forget. Weak sentiment in Europe and America has compounded the shift towards online and convenience channels, catching some firms unaware. On one side of the Atlantic commentators are describing the era of “big box” stores as over, while on the other side high street vacancy rates have hit record highs and the Eurozone crisis has prompted austerity and unrest.
2013 could bring more of the same as bankruptcies and bearishness continue to dominate. But against this backdrop retail will retrench and strategise to become leaner and more multichannel orientated.
India & China map out a new geography
Although opportunity in China is already well established it does not mean that it will slacken. In 2013 China could complete a hat trick of becoming the world’s largest e-commerce market, the world’s largest grocery retail market and the world’s largest luxury goods market.
Although fears of a slowdown emerged in 2012, retail figures released in October and November point towards a recovery in volume growth, which is expected to remain in double digits in 2013.
Home and Away: Volume Retail Sales Growth
in BRIC vs Mature markets (%)
Country/Region 2011 2012 2013
Brazil 6.4 6.7 6.5
China 10.9 10.9 10.5
India 3.8 12.1 6.3
Russia 7.2 5.4 3.8
United Kingdom 0.6 1 -0.4
USA 4.1 2 1.6
Western Europe -1 -1.7 -0.7
Source: Economist Intelligence Unit
For retailers, however, India could prove to present an even more exciting opportunity thanks to the opening of retail up to foreign investment in single and multi-brand operations. The market potential here is not without challenges. The liberalisation has been met with widespread opposition and come with a raft of clauses from state vetoes to rigid local sourcing policies and minimum logistics investmens. So far only WalMart has stepped into the multi-brand fray, although
the Carrefour, Metro AG and Tesco are considering their options.
Domestic attentions won’t fade
Investment in new markets will not come at the expense of home markets as retrenchment strategies continue. Tesco and Carrefour both saw domestic shares slide in 2012 and both have refocused strategies at home. Tesco exited Japan in 2012, but Carrefour’s withdrawal rate has been even more dramatic. The world’s 2nd largest retailer has sacrificed operations in Greece, Singapore, Malaysia, Colombia and Indonesia. Both will continue to shed foreign operations into the coming year, with Turkey and Poland likely candidates for Carrefour and Tesco’s lossmaking “Fresh & Easy.” operation in the US is already under review for a likely exit.
Europe could become a battleground for emerging market retailers in the coming year. UK real estate firm Savills has identified five Chinese retailers considering expansion in London next year. European casualties of austerity could offer bargains for cash rich emerging market firms.
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