Emerging markets continue to represent attractive investment opportunities for global retailers and the economic downturn has made entry to many of these markets more critical and relevant, according to global management consulting firm A.T. Kearney’s eighth annual Global Retail Development Index (GRDI), a study of retail investment attractiveness among 30 emerging markets. 
With declining sales in home markets and consumer spending still tight, global expansion increases in importance as a strategy for growth. The global recession has made prime real estate locations increasingly available and affordable in many developing markets.
It also has made acquisition valuations of many local-market retailers very attractive. Unlike most developed markets, GDP in emerging markets is expected to continue to grow, albeit at a slower rate, and populations in many countries are younger, increasingly urban and showing a growing interest in modern retail formats. 
“With economic conditions in developed markets improving so slowly, emerging markets are becoming much more important sources of growth for global retailers,” said Hana Ben-Shabat, A.T. Kearney partner and co-leader of the study. 
“Leading global retailers must develop a portfolio strategy that balances big and developed markets with small and developing markets to manage risks across the globe.”
Larger, resilient developing countries sit atop the 2009 GRDI as they are most likely to lead the economic recovery. For the fourth time in five years, India is the most attractive country for retail investment according to the Index.  Russia, China, the United Arab Emirates, Saudi Arabia, Vietnam, Chile, Brazil, Slovenia and Malaysia round out the GRDI’s 2009 top 10 countries (see full ranking of 30 countries below). 
“With our close proximity and established trade links with Asia, Australian retailers are well-placed to expand into many of the countries that rank highly on the GRDI, including India and China. Many Australian companies have also made successful inroads into the Middle East, so there are plenty of opportunities for companies keen to expand their global footprint,” said Terry Innerst, vice president, A.T. Kearney Australia.
“Countries throughout Asia are well positioned for an early recovery from the economic crisis as domestic demand is holding up well, GDP growth continues and trillions of dollars of sovereign reserves are providing governments and state banks with tools for action,” said Michael Moriarty, A.T. Kearney partner and co-leader of the study. 
“Asian countries continue to transform their economies with domestic consumption as a primary focus – a trend that should favour continued growth in retail over the long term.” 
In India, slower retail sales are causing Indian retailers to delay expansion plans and restructure their operations. But this has opened the window of opportunity for global retailers and many, including Wal-Mart, Carrefour and Tesco, are continuing expansion plans as Indian consumers grow increasingly affluent, brand-conscious and familiar with global retail formats. 
In China, the GRDI’s number three country, a $585 billion stimulus package and efforts to boost economic consumption are showing early signs of success as retail sales have grown in early 2009. The country’s tier-2 and tier-3 cities in the central and western regions are attracting foreign retailers’ attention. These cities are less affected by the economic crisis and are more suitable for new expansion than larger Chinese cities. Both Wal-Mart (140 stores in China) and Carrefour (135) have continued their expansion throughout the downturn.
The United Arab Emirates made the biggest move in the 2009 GRDI, rising 16 places to fourth position as its oil-driven economy proved more resistant to widespread downturn than other countries. While the UAE’s population of five million is relatively small compared to the three countries above it in the GRDI, it has the highest per capita consumer spending of any country in the Index. In fact, Dubai is on track to have the world’s largest amount of shopping space per capita by 2010.  Retailers in Dubai are focusing on local customers as tourism drops and that is creating entry opportunities for hypermarkets and discounters. 
Yet while Dubai has recently been synonymous with retail expansion, Abu Dhabi is the rising star of the Emirates according to the study. It has remained well insulated from the global economic crisis because of its oil reserves and sovereign wealth fund.  Several new museums and a Formula One race are planned and will help it attract tourists. Immigration is also expected to pick up as Abu Dhabi becomes a nearby alternative to Dubai. New city developments will increase real estate supply and strong awareness of global brands among the population will provide opportunities for foreign retailers. 
Vietnam, the most attractive country in last year’s GRDI, fell to sixth position because of inflationary pressures from its own real estate boom, consumer price inflation in the last half of 2008, and a significant drop in its export-driven economy.  However, many global retailers are well established in Vietnam, including South Korea’s Lotte, Japan’s Seiyu, Malaysia’s Parkson, Hong Kong’s Dairy Farm and Germany’s Metro.
“Vietnam has some short-term challenges, but our long-term outlook for the country remains positive as it continues to open its doors to international investors,” said Ben-Shabat. 
“Its population is young and it continues to urbanise, making it easier for suppliers to fulfil the country’s demand.”
Published since 2001, the GRDI helps retailers prioritise their global development strategies by ranking the retail expansion attractiveness of emerging countries based on a set of 25 variables including economic and political risk, retail market attractiveness, retail saturation levels, and the difference between gross domestic product growth and retail growth.