Global retail leaders remain optimistic about emerging markets, citing large populations, booming middle classes and fragmented local provision as the drivers of opportunity. But, they told delegates at the World Retail Congress in Barcelona last week, not all markets are the same and tailored local strategies are critical.
“With large populations and low levels of retail consolidation, the opportunity for growth [ìn emerging markets] is phenomenal,” said Philip Clarke, international director of Tesco.
For example, he said that by 2025 there would be an estimated 220 Chinese cities with populations of more than one million each.
“For international companies, allowing local teams to respond to the needs of customers is not an option, it’s absolutely critical,” he warned.
Clarke said the key drivers behind emerging market opportunities are large populations, rapidly expanding middle classes, high speed internet access and an attraction to foreign brands among consumers. He also said that despite local differences, Tesco’s research had identified the common concerns among international customers including price awareness, value and ethics, sustainability and health.
Ian Cheshire, Group CEO of Kingfisher, said it was not too late for retailers to enter emerging markets, but that for some countries the timing may not yet be right for a retailer like Kingfisher. “For some emerging markets, such as India, it’s too early and the market isn’t ready for a large home improvement retailer yet,” he said.
Dr Wu Jianzhong, chairman of Chinese retailer Wu Mart was upbeat about China’s prospects as an emerging market. “The window of opportunity in China is still open and open widely.”
Wu highlighted the $700 billion of savings currently held by Chinese households and said retailers “needed to do something to release this money”. He stressed the need for localisation by incoming international retailers suggesting they establish local cooperation teams and ensure they adapted to local policies, especially those on trade unions, employment and contract laws.
“Understanding the value of your brand equity in markets you want to go into is critical to success,” said Frank Tworecke, president of Warnaco Sportswear Group, licensee of brands including Calvin Klein in 110 countries. He also stressed the importance of developing infrastructure that allows brands to bring their product to the consumer.