June 21, 2010. European and US retailers are increasingly having to target smaller emerging countries for international expansion, as growth on home soil becomes harder to deliver with the tough outlook for consumer spending.
While China has emerged as the top emerging retail destination for big Western chains, they are widening their empires to the less well-known markets of Kuwait, Peru and Chile, which have been more insulated and resilient to the ravages of the global recession, according to a survey by AT Kearney, the global management consultancy. Hana Ben-Shabat, a partner at AT Kearney, said: “Reliance on developing countries for future growth is no longer a ‘nice to have’ but a necessity. Establishing operations in a portfolio of countries both large and small offers the best path to global success for retailers.”
Many of the UK high street’s biggest names, including Marks & Spencer, Debehams, Topshop and Tesco, are extending their already substantial international presence to compensate for modest growth in the mature UK market. Derek Lovelock, the executive chairman of Aurora Fashions, which operates the fashion chains Karen Millen, Coast, Oasis and Warehouse, said: “Most of us are pretty saturated in our home markets and we recognised that a while ago.”
Aurora’s overall international business has grown by 63 per cent in the past three years; and overseas now accounts for a greater proportion of Karen Millen’s sales than the UK.
AT Kearney’s Global Retail Development Index, which ranked 30 emerging countries in terms of the urgency of western retailers to launch there, put China as the top destination in 2010, up from third last year.
Ms Ben-Shabat said: “One of the main reasons is that the Government’s stimulus package really seemed to work. In China, we still see the growth of the middle class and the movements from the rural areas to urban areas. While some of the big cities [such as Beijing and Shanghai] are saturated, there is still huge potential in some of the second-tier cities.”
Aurora’s Mr Lovelock says: “China is similar to Russia. There is a lot of retail space opening up and there is a strong appetite for international [chains] and particularly strong English fashion brands.”
In fact, nearly 80 per cent of the retail executives surveyed by AT Kearney cited one of China, India, Brazil and Russia as markets on their company’s plans for short-term international growth.
