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UK retailers are overlooking South America report finds

A report which looks at the top developing countries for global retail expansion has found that UK retailers may be missing out on opportunities for growth by overlooking South America.

GENERAL MERCHANDISE

UK retailers are overlooking South America report finds

A report which looks at the top developing countries for global retail expansion has found that UK retailers may be missing out on opportunities for growth by overlooking South America.

The tenth annual 2011 Global Retail Development Index published by A.T. Kearney saw Brazil jump to first place in the list of countries from fifth place last year.

A.T. Kearney said that the 2011 GRDI ranking mirrors the changes that have taken place in global markets, and the impacts those changes have had on different emerging economies which have fared well during the recession. In addition to Brazil’s top ranking, three other South American countries - Uruguay, Chile and Peru - made the top ten of the GRDI.  

Emmanuel Hembert, principal at A.T. Kearney said: “It is clear to us that UK retailers may be missing out by not actively considering South America.  Tesco, M&S and Sainsbury’s are present or planning developments in Eastern Europe and Asia, which are emerging markets, but have not shown plans to open stores in South America.  This is despite the fact that it is the number one growth market for international retailers.  When one considers that among the top global food retailers, Wal-Mart has a developing presence in Brazil, Argentina and Chile and Carrefour has hugely successful developments in Brazil, Argentina, and Colombia, it is a concern that major UK retailers have not jumped at the opportunity.  Brazil is a particularly attractive target expansion market given expected GDP growth of 5% over the next five years, a large and highly urban population, and surging retail sales.”

Hembert added: “In addition to the substantial investment in infrastructure the Brazilian government is planning, inflows of foreign capital are rising dramatically as well.”

Uruguay climbed up the rankings to  second pace this year, from eighth in last year’s GRDI. The country’s limited scale combined with positive macroeconomic conditions makes it an interesting choice for retailers looking to expand into more contained markets, said A.T. Kearney.
 
Chile rose to third place after a strong recovery from the 2009 recession. The Chilean government created incentives to stimulate retail consumption, and as a consequence Chile’s GDP grew 5.2% in 2010 and is expected to grow another 6.1% in 2011.

Hana Ben-Shabat, A.T. Kearney partner and  co-leader of the study said, "The past ten years of experience in global retailing shows that there is no ‘one size fits all’ formula for global expansion. Different countries are at different levels of development and have different risk/return profiles, which require retailers to tailor their approaches accordingly and assemble a portfolio of markets to balance short-term risk with long-term growth aspirations."

The GRDI ranks the retail expansion attractiveness of emerging countries based on a set of 25 variables including economic and political risk, retail market attractiveness, retail saturation levels, and the difference between gross domestic product growth and retail growth. A detailed analysis and country-specific results for the 2011 GRDI is available at www.grdi.atkearney.com.

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