India Tops Annual List of Most Attractive Countries for International Retail Expansion

CHICAGO, July 8 /PRNewswire/ -- India represents the most compelling international investment opportunity for mass merchant and food retailers looking to expand overseas, according to management consulting firm A.T. Kearney's 2005 Global Retail Development Index (GRDI), an annual study of retail investment attractiveness among 30 emerging markets.

The study also found that countries in the top third of the annual index experience retail sales growth rates twice as high as countries in the bottom of the index, indicating retailers should pay particular attention to entering these markets early.

Published annually since 2001, the GRDI helps retailers prioritize their global development strategies by ranking 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.

India moved from second place to first in the 2005 index, displacing Russia which had held the top spot since 2003. Driving India's move was a greatly improved investment climate due to the recent relaxation of direct ownership restrictions on foreign retailers. The country's retail market totals $330 billion, is vastly underserved and has grown by 10 percent on average over the past five years. It is also one of the most fragmented retail markets in the world -- the combined market share of the top five retailers totals less than two percent.

"The message for retailers on India is clear: move now or forego prime locations and market positions that will become saturated quickly," said Mike Moriarty, A.T. Kearney vice president. "Global retailers that missed opportunities to capture first-mover advantage in China can make up for it in India."

A.T. Kearney anticipates that global retailers such as Wal-Mart, Carrefour, Tesco and Casino will rapidly take advantage of the more favorable FDI rules and enter India through partnerships with local retailers. Other retailers such as Marks & Spencer and Benetton Group who are currently operating through a franchise model will most likely switch to a hybrid ownership structure. Combating the moves of global retailers, leading Indian retailers such as Pantaloon, Westside and Big Bazaar will look to increase scale and enhance logistics and supporting technology.

Russia's drop from first to second place in the GRDI can be attributed to a steady stream of foreign retailers entering the market during the last few years. While the country remains attractive its market saturation continues to increase indicating the time is now for retailers still thinking about entering Russia.

Despite Russia's drop, Eastern Europe continues to represent the best investment opportunities for retailers -- Eastern European countries make up 11 of the top 20 investment destinations in the index. Ukraine jumped eight places to third because of strong increases in GDP and retail sales, a highly fragmented market and large urban population. Bosnia-Herzegovina and Macedonia both enter the index for the first time this year.

Joining India, Russia and Ukraine on the list of 10 countries retailers should enter immediately are China, Slovenia, Latvia, Croatia, Vietnam, Turkey and Slovakia (see complete listing below).

"Eastern Europe really represents three distinct opportunities global retailers should be acting on: Russia, traditional Eastern Europe like Hungary and Romania, and 'new' Eastern Europe like Ukraine, Slovenia and Latvia," said Fadi Farra, senior manager with A.T. Kearney and leader of the study. "Retailers who plan properly can leverage capabilities across some of these smaller, closely located countries and gain a distinct advantage."

The research suggests that fast-moving retailers with patience will be rewarded if they enter the right countries. A.T. Kearney created a GRDI circa 1995 to apply the methodology to the world's developing markets at the time. Not one of the top 10 markets in 1995 remains there today. Between 1995 and 2004, the countries at the top of what would have been the 1995 GRDI experienced growth in modern retail sales of 9 percent. In contrast, those at the bottom of the 1995 index grew at just 4 percent.

"Many of the top 1995 countries experienced macro-economic shocks like currency crises and natural disasters, yet their retail sales rate still grew faster than other countries over the 10-year period," Moriarty said. "This underscores the need for retailers to take a long-term view when entering developing markets and realize that economic or political instability could be among the costs of first-mover advantage."

"At least 10 retailers have exited emerging markets so far in 2005," Farra said. "Too many retailers still under-play the importance of timing when planning their entry in new markets."

A copy of the 2005 GRDI study and individual destination reports on India, Russia and Ukraine is available at http://www.atkearney.com/main.taf?p=5,3,1,108

About A.T. Kearney

A.T. Kearney (http://www.atkearney.com/ ) is one of the world's largest management consulting firms. With a global presence spanning major and emerging markets, A.T. Kearney provides strategic, operational, organizational and technology consulting and executive search services to the world's leading companies. A.T. Kearney is the management consulting subsidiary of leading global technology services company EDS .

2005 A.T. Kearney Global Retail Development Index Country 2005 Rank 2004 Rank Change India 1 2 1 Russia 2 1 -1 Ukraine 3 11 8 China 4 3 -1 Slovenia 5 4 -1 Latvia 6 6 0 Croatia 7 5 -2 Vietnam 8 7 -1 Turkey 9 8 -1 Slovakia 10 9 -1 Chile 11 12 1 Thailand 12 10 -2 Bulgaria 13 13 0 South Korea 14 14 0 Tunisia 15 15 0 Macedonia 16 N/A N/A Lithuania 17 17 0 Malaysia 18 19 1 Hungary 19 16 -3 Bosnia and Herzegovina 20 N/A N/A Saudi Arabia 21 21 0 Romania 22 24 2 Morocco 23 18 -5 Mexico 24 26 2 Egypt 25 20 -5 Taiwan 26 22 -4 Philippines 27 23 -4 Indonesia 28 28 0 Brazil 29 N/A N/A Pakistan 30 N/A N/A About the study

A.T. Kearney's Global Retail Development Index ranks 30 emerging countries on the urgency for retailers to enter the country. The scores are based on 25 variables across four primary categories: economic and political risk; market attractiveness; market saturation; and time pressure (difference or addition between gross domestic product and modern retail area growth).

CONTACT: Douglas MacDonald - A.T. Kearney (+1) 312-223-6892 douglas.macdonald@atkearney.com