UK retailers overlook South America for expansion, finds report


UK retailers are missing out on opportunities for growth by overlooking South America, according to a new report by global management consultants, AT Kearney, which ranks the top developing countries for global retail expansion.

Its 2011 Global Retail Development Index (GRDI) reveals Brazil jumped to first place from fifth in last year’s study.

According to AT Kearney, the 2011 GRDI ranking mirrors the dramatic changes that have taken place in global markets, and the impacts those changes have had on different emerging economies.  South American countries have fared well during the recession posting an impressive 6% growth in 2010, it says. In addition to Brazil’s top ranking, three other South American countries – Uruguay, Chile and Peru – made the top 10 of the GRDI.

Emmanuel Hembert, principal at AT Kearney, said: “It is clear to us UK retailers may be missing out by not actively considering South America. Tesco, Marks & Spencer and Sainsbury’s are present or planning developments in Eastern Europe and Asia, which are emerging markets, but have not shown plans to open stores in South America. This is despite the fact it is the number one growth market for international retailers. When one considers among the top global food retailers, Wal-Mart has a developing presence in Brazil, Argentina and Chile and Carrefour has hugely successful developments in Brazil, Argentina, and Colombia, it is a concern major UK retailers have not jumped at the opportunity.

“Brazil is a particularly attractive target expansion market given expected GDP growth of 5% per year over the next five years, a large and highly urban population, and surging retail sales.”

Hembert added: “In addition to the substantial investment in infrastructure the Brazilian government is planning, inflows of foreign capital are rising dramatically as well.”

Uruguay climbed up the rankings to second place this year, from eighth in last year’s GRDI. The country is riding Brazil’s coat-tails, and experienced significant GDP growth of 8.5% in 2010, said AT Kearney.

The country’s limited scale combined with positive macroeconomic conditions makes it an interesting choice for retailers looking to expand into more contained markets, the consultants add.

Chile rose to third in the ranking after a strong recovery from the 2009 recession. It is now considered one of South America’s most competitive markets, said AT Kearney. The government created incentives to stimulate retail consumption, and as a consequence Chile’s GDP grew 5.2% in 2010 and is expected to grow another 6.1% in 2011.

Another region that ranked highly in the 2011 GRDI was the Middle East and North Africa, said AT Kearney. While the political unrest may affect immediate plans to enter countries such as Egypt and Tunisia, the region’s extraordinarily young population (more than 60% between the ages of 15 -39) could result in greater economic stability and integration into the world economy in the long run. Kuwait, Saudi Arabia, and the UAE (all top 10 GRDI markets in 2011) have not experienced the turmoil of some of their neighbours and are expected to remain stable going forward.

The 2011 Global Retail Development Index marks the 10th anniversary of this global study. The key learning from an analysis of the last 10 years is global retail expansion is a portfolio game, said AT Kearney. Retailers must have an optimal mix of countries, formats and operating models to succeed.

Hana Ben-Shabat, AT Kearney partner and co-leader of the study, said: “The past 10 years of experience in global retailing shows there is no ‘one size fits all’ formula for global expansion. Different countries are at different levels of development and have different risk/ return profiles, which require retailers to tailor their approaches accordingly and assemble a portfolio of markets to balance short-term risk with long-term growth aspirations.”

AT Kearney said 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. A detailed analysis and country-specific results for the 2011 GRDI is available at

Global Retail Development Index, 2011

Country 2011
Brazil 1 5 +4
Uruguay 2 8 +6
Chile 3 6 +3
India 4 3 -1
Kuwait 5 2 -3
China 6 1 -5
Saudi Arabia 7 4 -3
Peru 8 9 +1
U.A.E. 9 7 -2
Turkey 10 18 +8
Lebanon 11 N/A N/A
Egypt 12 13 +1
Albania 13 12 -1
Russia 14 10 -4
Kazakhstan 15 N/A N/A
Indonesia 16 16 No change
Morocco 17 15 -2
Philippines 18 22 +4
Tunisia 19 11 -7
Sri Lanka 20 N/A N/A
Malaysia 21 17 -4
Mexico 22 25 +3
Vietnam 23 14 -9
Colombia 24 26 +2
Argentina 25 N/A N/A
South Africa 26 24 -2
Panama 27 N/A N/A
Dominican Republic 28 23 -5
Iran 29 N/A N/A
Bulgaria 30 19 -11