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KALISH: Chengdu in the Szechuan Province offers massive potential for investors seeking to invest in China’s retail industry.

India offers opportunities through the backdoor, and Wal-Mart's joint venture with India's Bharti Enterprises to open up to 15 wholesale outlets by 2015 employing about 5,000 people selling groceries, consumer goods, fruits and vegetables, has demonstrated ways in for large overseas companies.

The first Bharti Wal-Mart Private Limited store is set to open by the end of this year.

"Wal-Mart operates the supply chain for Bharti. From Wal-Mart's perspective, they are involved because they are gambling that some point in the future the government will change the regulatory environment. Other major global retailers are looking at similar joint venture operations," Kalish says.

According to speculation, Tesco is still looking for a partner in India, he mentions, adding that modern retailing be reach up to 20% of sales in the country, if there was not a government backlash and protests in response to new competition.

Franchising could be the solution for global companies in India, he says, and "rather than have modern retailers compete, it is possible that big retailers could franchise the independent retailers and give them a strong brand name and high supply chain standards."

"There are political constraints affecting efficient behaviour, regulations affecting the labour market, farming, transportation, and even tariffs on transportation of goods between states. There isn't even free trade within the country," he blasts.

"The Government in India is very committed to reforms, but it is in a coalition with parties which are against these reforms are they are in the interest of the small shopkeepers, who are afraid of competition from big retailers."

Russia's economy is growing rapidly, however the retail industry is risky because of the dependence of economic growth on the price of oil. There are relatively few formal limits on foreign and domestic investment, and companies such as IKEA have been profitable.

Currency volatility creates a degree of uncertainty that may constrain foreign investment in emerging market and another challenge is backlashes against foreign and formal retailing in countries including Poland, Argentina and Brazil.

"We are likely to see rising values of currencies impact the purchasing power of customers, the rapid rise of the middle class trigger shifts in lifestyle formats and the rise of modern retailing formats and a significant rise in sovereign wealth funds in emerging markets in the next few years."

Away from the demographics, the key considerations are an understanding of the current retail environment in the emerging market in question, the availability of an open and transparent legal environment and a developed banking system.

"Compare rental costs, consider whether manpower is available and how strong the patent laws are that would protect your brands," says Sunil Nayak, chief operations officer - international division, Landmark Group.

The group opened its first store in Bahrain in 1978, and it now occupies a total retail area of 10 million ft² in 11 countries, across 800 stores with the help of 20,000 employees, after successfully transporting its concepts into international markets.

"Our future plan is to be in the top three retailers in the Middle East & North Africa, India and China."

"Compare rental costs, consider the attitude of the local banks towards foreign loans, look at direct and indirect taxes, and restrictions on expatriate labour that could hinder your business," he warns.

Vietnam ended India's three-year reign as the most attractive emerging market destination for retail investment according to the seventh annual Global Retail Development Index (GRDI), a study of retail investment attractiveness among 30 emerging markets conducted by management consulting firm A.T. Kearney.

Vietnam's leap from fourth in the 2007 GRDI to first place in 2008 was driven by strong GDP growth, changes to the country's regulatory structure favoring foreign investors, and increasing consumer demand for modern retail concepts. India, Russia and China, the top three countries in last year's GRDI, fell to second, third and fourth, respectively, in the 2008 GRDI.

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