Germany, UK, Canada are easiest countries for retailers to set up in, finds new study
Retailers eyeing international expansion in growth markets such as Brazil, India or China will find they are some of the most difficult countries to enter successfully according to new research.
Tough set up conditions, poor infrastructure, complex legal frameworks and a lack of access to prime premises are just some of the issues that new entrants are facing.
The first annual Retail International Programme Expansion (RIPE) Index, published by global built asset consultancy EC Harris, found that Western markets such as Germany, the United Kingdom and Canada are the easiest for retailers to expand into. This is due to the countries having an open business environment, mature property capability and the availability of prime shopping locations.
Colin Turner, head of retail at EC Harris said: “International expansion is the new battleground for retailers experiencing low growth in their domestic markets. Consumer appetite for Western brands in Asia makes these markets attractive, but not always easy to enter. Successful international expansion is about balancing the desirable with the doable. Much like a marriage, success is down to making a careful and committed choice, maintaining realistic expectations, and making plenty of adaptations along the way.”
Never Miss a Retail Update!The index ranks 40 international retail markets according to the five key factors that have a major impact on retail expansion success including quality of infrastructure, quality and quantity of the construction supply chain, property capability, legal framework and business environment. The best and worst countries were:
Top 10
1. Germany
2. UK
3. Canada
4. Netherlands
5. Japan
6. France
7. Australia
8. Saudi Arabia
9. USA
10. Taiwan
Bottom 10
31. Vietnam
32. Kazakhstan
33. India
34. Philippines
35. Romania
36. Argentina
37. Nigeria
38. Pakistan
39. Ukraine
40. Russia
EC Harris said the BRIC countries all present significant growth opportunities in terms of consumer demographics, however the RIPE report found that, when considering the ease of expansion into these countries, China is the leader, ranking 20th compared to 28th, 33rd and 40th respectively for Brazil, India and Russia. The report revealed that were it not for the low rating in the business environment category, China would compare favourably with mature Western and US markets, particularly in tier 1-4 cities.
Russia’s low rating on all categories in the study correlated with Wal-Mart’s decision not to enter this market after three years of intensive research. However, other multinational brands such as Kingfisher, Metro and Mothercare have expanded into Russia, albeit with much specialist support on the ground.
Turner continued: “With Western countries easier to enter, mature local retailers need to protect their market share against foreign competition through keeping their retail offer fresh, for example through refreshing their store environments. The new Marks and Spencer concept store is one good example of this.”
The RIPE index shows that Saudi Arabia, Qatar and UAE present good opportunities, ranked 8th, 11th and 15th respectively. Luxury brands such as Bloomingdales are succeeding in the Middle East helped by the high quality retail space on offer and an overall willingness to do business in the region. Future development in the lead up to the Qatar 2022 World Cup will see several major malls come to market, presenting further opportunities for retailers.
The highest scoring country in Latin America was Chile, at 13th place overall, due to its favourable retail market and expansion conditions. Wal-Mart has already taken a leadership position in Chile, acquiring 58% of domestic retailer D&S in 2009.
