Outwards and upwards

Economic turbulence has created a tougher operating environment for retailers in the Middle East in recent months. However, escalating inflation has simultaneously impelled the lure of emerging markets.

Despite setbacks in the US and Europe, GDP growth across India, China and Russia is expected to top 8% in 2008 and retailers are flocking away from their home markets to ring in double-digit growth in these large windows of opportunity.

Failure to do so could result in the chance for retailers in this region to muscle through the current economic turmoil, constrain future earnings and truly differentiate themselves from the competition by displaying their ability to reshape their templates.

Markets typically progress through four stages as they evolve from emergence to maturity: opening, peaking, declining and closing, and the latest Global Retail Development Index (GRDI) from management consultancy firm A.T. Kearney discovered the crowded peaking stage to stem from the increased recognition of the growth potential and consumer demand for hyper action.

With organised retail accounting for less than 5% of the market, India's opportunity is unchallenged and consumer spending has rising sharply as more than 33% of the country is below the age of 15. In the past four years alone, consumer spending rose by an impressive 75%. India's organised retail industry has grown by more than 25% and in the grocery category alone, the top five firms had a combined store growth of 50%.

Vietnam topped the GRDI list as the most attractive opportunity for 2008, encouraged by its recently deregulated retail markets, stable political base, robust economy and 79 million people under the age of 65. The government is undertaking a privatisation program and it has launched a programme to develop wholesale and retail real estate throughout the country by 2010.

However, before Middle East retailers pack their suitcases and flee to cash in on the switch from traditional, open-air markets to hygienic, haggle-free shopping among the middle- and upper-class consumers in Ho Chi Minh City they should first look on their doorsteps.

The Middle East and Africa region is in fact the hottest market for modern retail growth today, making up more than a third of the top 20 GRDI countries, from Morocco to Algeria, Egypt, Jordan and Saudi Arabia, where modern outlets are attracting Saudi shoppers in the cities of Riyadh, Dammam, Jubail and Jeddah.

Favourable demographics and success stories are indeed music to retail bosses' ears, yet myopic regulations and incapable supply chains are just a taster of the risks. This month Retail News provides the definitive guide to survival in emerging markets, emphasising the crucial need for timing to stay ahead of rivals.

Lynne Nolan is the editor of Retail News Middle East.

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