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Retailers are pressing ahead with tactics to seize shares in untapped countries. Retail News offers the complete survival guide to emerging markets.

Most of the largest retailers in the world are based in Western Europe and the US and now we're going to see more world-class retailing emanating from emerging markets," predicts Dr Ira Kalish, director of global economics & consumer, Deloitte Research, USA.

The obstacles of doing business in the Middle East, from high operating costs and foreign competition to land shortages and ownerships stand in the way of retailers are forcing increasing numbers of companies to steer their growth strategies towards emerging markets.

China's economy is growing rapidly despite the economic slowdown in richer markets, and the country has recently appeared as of one the most attractive emerging markets for foreign investment.

"Most of the big emerging markets have high foreign currency reserves, and today they often have undervalued currencies to make exports competitive. In the past, many of these countries had corrupt and non-transparent banking systems, whereas the financial systems are now much more transparent," says Kalish.

China has led the way in terms of retail modernisation and until recently it was mostly on the part of big European, small to medium-sized food retailers, yet "interior, secondary cities are now growing rapidly from a much lower base".

Chengdu in the Szechuan Province is much poorer than the bigger coastal cities but has very limited modern retail, and currently represents low hanging fruit for retailers seeking to invest in China.

Foreign investment has previously focused on mass merchandise retailing, however the privatisation of housing stock in China has stimulated interested from home-related and furnishing retailers including B&Q and IKEA.

Although its per capita GDP remains low given China's large population, consumer spending has more than doubled from the mid-1990s and continues to grow rapidly in the large southern and eastern cities.

"The Government has privatised state-owned enterprises, including department stores, which have become much more efficient in private hands, in some cases these are being acquired or franchised by foreigners," Kalish comments.

The development of more entrepreneurial retailers such as Gome Electronics and the presence of improved quality retailing have been influenced largely by that privatisation.

The greatest misconception in the relatively poor country is that discounting is the most important format for retailers, he says.

"Wal-Mart in China's main competition is not the other retailers, but the street market. They cannot match those prices, as the markets have virtually no overheads.

For a company like Wal-Mart to succeed, they have to offer something else: the convenience of one-stop shopping, better merchandising when it comes to food, better hygiene, air conditioning, and fresher foods," he explains.

The attributes of a street market, in the sense of the theatre of retailing and its compelling nature stand in stark comparison to the efficient supply chain, in-stock position and reliability of merchandise of modern retailing.

"Price is not the issue in many of the poorer countries when it comes to the success of modern retailing," he says.

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